The Debt Problem and Economic Development in Latin America

Abstract

The outward transfer of resources from Latin American hinders growth and economic restructuring when aggravating the foreign exchange constraint and the savings/fiscal constraint in this region. In the absence of systematic payment guarantees, debt reduction schemes through market options promise to reduce the transfer burden only gradually. On the other hand, a more ambitious public policy initiative that recognizes the collective nature of the debt problem, will surely allow a more significant and orderly reduction of it. It will also be socially efficient and it will extend to more countries.