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Latin American Crisis vs Asian Crisis

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University of Toronto St. George
Jack Carr

March 11, 2008 Ramsay wright 141 March 23 11-1pm Ramsay wright 142 March 24 11-1pm -fiscal deficit of industrial countries will crowd out lending to developing countries -94 out of 116 developing countries are experiencing an economic slow down -economic assistance is needed for countries -no social welfare in developing countries -export led growth developing countries will be decreased Balance of payment deficit, federal deficit, double deficit story -formula for successful growth for latin American countries, is expand industry with export industrial products, need new investment new plants, new social overhead -]Z2}[L]7Z}}}Z]Z}]Z o] ] Brazil-steel export blocked by protectionism , takes a long time for countries to drop barrier Debt crisis of latin America -lost decade of economic growth, standard of living fell 7% in 1990 from 1980 -imports-gain foreign exchange to pay for these, imports had to be slashed, 30-40% tax, some of the imports were necessary for economic growth, economy suffers due to lack of imports, slow growth -]Lo]}L7]L}}oL]L2Z}]L7 L[ o] ]7 ]}]LK}L7 ]o had inflation rate of 1000%, huge economic costs -capital flight, takes foreign exchange and savings out o }L7}L[lL}ZL]will be back Need stable economic policies for a period of time before people will bring money back, with lower inflation Williamson How should you get your economy ordered-Washington Consensus Want industrial countries to grow too Effort to gain productivity, tech. transfer in Latin America was lacking Porter, latin American countries did not take out patents from US, tech. change lacks Meeting interest payments of debt-for Borrowing countries -took a lot of tax, for a decade, international transfers went from developing countries to industrial countries, only went one way, capital transfers for interest repayment -a refinancing of debt with Mexico and US, major reorganization 1) Western banks would write down loans to 65% of par, interest rate was to be at prime+1%, floating US prime, write off 35%, get 65% in 20 years guaranteed, if Mexico did not repay the o}L7D^2}[}oZLlZ7D^-}LZo ]L2Z 2) 100% return, interest 6.25% fixed
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