Transcript Debt - Bridgewater State University

Pre-Game Show
(Terms worth knowing)
GDP: Gross Domestic Product
HDI: Human Development Index
ISI: Import-Substituting Industrialization
FDI: Foreign Direct Investment
Gini: Corrado Gini (Italy 1912)
Sovereign Debt and the
Erosion
of
Sovereignty
James Hayes-Bohanan, Ph.D.
Professor of Geography &
Latin American Studies
Bridgewater State University
J2000: GETTING
INTO DEBT
Credit
What is it for?
Big Projects
Aswan High Dam:
World Bank’s Kick-off Event
Petrodollars
Literally: Too much of a good thing!
Overlending
Commodity Earnings over Time
Earnings
Purchasing Power
Raúl Prebisch, ECLA
¡Basta!
Mexico
Moratorium
August 1982
Brazil followed
Slow growth – the lost decade
Inflation and hyperinflation
Capital flight
Contagion effect
Baker Plan - 1985
Treasury Secretary James Baker

Loans to cover interest payments were made
with conditions:




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Privatization of state enterprises
End to subsidies
Opening the economies to foreign investment
12 of 15 large debtors complied
Soon comprised 20 percent of all World Bank
(WB) debt
www.ThirdWorldTraveler.com
Brady Plan - 1989
Treasury Secretary
Nicholas Brady



Sought to attract investment by reforming
economies
Encouraged cooperating private banks to
reduce their claims against LDCs
Used new IMF (International Monetary
Fund)/WB funding to collateralize debts in the
form of new bonds - in other words,
multilateralized the debt
www.darbyoverseas.com
Secondary Markets


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Reduced claims
Writing down debt
Dimes or pennies on dollars
Debt-Equity Swaps
Debt-for-Nature
Swaps


Baker and Brady Plans
Liberalization

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Devalue currency
Open markets
Reduce government intervention
Privatize assets
Whirled Bank: A World Full of Poverrty
A Consensus?