1982

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Chapter 3 in The Debt Crisis of the 1980s, 2023, pp 72-92 from Edward Elgar Publishing

Abstract: The Mexican crisis that erupted in August 1982 directly threatened the entire Western banking sector which, it soon appeared, would have been bankrupted if Mexico and the main Latin American had actually defaulted. The months that followed were thus marked by a race, led by the US Fed and the IMF, against the very short-term risk of an international systemic crisis. This chapter draws on the existing literature and on the interviews with key crisis-managers, particularly Jacques de Larosière (IMF head), Paul Volcker (Fed chairman), and Guillermo Ortiz and José Ángel Gurría (key members of the Mexican negotiating team). Some novel pieces of archives have also been found. Beyond the chronological account of what happened, this chapter insists on the underlying problems of collective action among banks and on the open pressure that had to be exercised on them. It was also at that time that a consensus was established that this was only a liquidity crisis, not a solvency crisis, which would have called for write-offs.

Keywords: Economics and Finance; Law - Academic; Politics and Public Policy (search for similar items in EconPapers)
Date: 2023
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