1982

Debt crisis in emerging countries

In 1982, Mexico declared that it could no longer honour its payments to foreign creditors. In its wake, fourteen Southern countries declared themselves insolvent. This crisis was mainly caused by the rise in interest rates in the North to curb inflation, the drop in commodity prices and some relatively unwise investments in developing countries. The seven richest countries in the world (G7) decided to com-mission the International Monetary Fund to put in place a series of structural adjustment plans aimed at improving the finances of indebted countries in exchange for financial aid and debt relief.