Alternative Outcomes of the Latin American Debt Crisis: Lessons from the Past

Abstract

Will the denouement of the current Latin American debt crisis be unilateral default or preemptive concessionary write-downs of the debt? If either outcome occurs, what are the implications for the U.S.–centered world trade and financial system and, in particular, for the trade and financial links between Latin America and the United States? The crisis containment strategy instituted by the United States in 1982 presumed a negative answer to the first question, thereby ruling out the second as irrelevant. But by 1986, fading confidence in that strategy has reopened both questions.