The Latin American Economies and Debt: Institutional and Structural Response to Crisis

The transnational economy's institutional structure, led by the International Monetary Fund (IMF) and the US, responded to the Latin American debt crisis by providing bridge loans accompanied by conditionality designed to deepen the transnational integration of these economies through a drastic restructuring of their economic and political structures. In attacking balance-of-payments problems, the IMF: 1. compels deficit countries to invoke recessionary policies to correct their internal and external balances, 2. encourages them to reverse protectionist tendencies, and 3. demands a distinctly diminished role for the state in the economy. Latin American leaders appeared initially to capitulate to the IMF austerity policies; however, there was systematic violation of IMF letters of agreement. The specific responses from Peru, Mexico, and Brazil are discussed, along with lessons for the future.