Latin American Debt Crisis 1982
The 1982 Latin American debt crisis began when Mexico, then others, could not roll dollar syndicated loans after Volcker’s rate shock — a sudden stop of bank credit that became a lost decade.
Definition
Petrodollar recycling funded floating-rate sovereign loans. US rates and a strong dollar blew up debt-service ratios. In August 1982 Mexico announced it could not meet payments. Banks were over-exposed; Baker and Brady plans later swapped loans for bonds.
Why it matters
It is the modern original of original sin plus floating-rate dollar debt. The banks’ forbearance versus a mark-to-market wipeout is the political economy.
Case
Volcker 1981 peak rates, Mexican reserves running out, and a syndicate that was also the rollover. The 1980s ‘lost decade’ was the real-side scar; Brady bonds were the financial close.
How to read it
Map currency mismatch, rate reset, and who holds the paper. A bank-syndicate sudden stop is not a bond-market tantrum — the holders cannot sell; they can only evergreens or write down.
Key papers
Landmark references with real publisher or arXiv links — not token-overlap noise.
- Comment on Latin American DebtDíaz-Alejandro · 1984 · Brookings PapersClassic diagnosis of the 1980s crisis.