74/YOUR MONEY OR YOUR LIFE!economies of the centre. One key reason for this growth was the
decision by 14 Latin American countries to suspend debt
payments;- between the long wave of slow growth from 19 73-74 onwards
and the current Latin American (and Third World) debt crisis.
The 1930s Latin American Debt Crisis
In 1931, crisis struck after a decade in which substantial foreign
loans had been made to Latin America, primarily by the United
States. In fact, following the First World War, the US had replaced
Britain as the biggest exporter of capital to Latin America. Britain
held a significant portion of Brazilian and Argentinian debt, but the
US dominated the rest of the continent. Due to war reparation
payments it had to make after the First World War, Germany was a
diminished financial power. Yet, along with Britain, it had been Latin
America's main creditor until the early twentieth century.
At the time, the Latin American debt was made up of securities and
bonds issued on the financial markets of the main capitalist powers.
This is similar to the situation in the 1990s, and unlike that of the
19 70s and 19 80s, in which debt largely took the form of bank loans.
A number of factors explain the increased supply of loans from
Europe and the US after the First World War: Latin America's ruling
classes inspired enormous confidence, guided as they were by a
positivist philosophy of progress; there were great hopes in the
development of the continent; huge tracts of land had been devoted
to export-oriented production, especially of foodstuffs; massive infra
structure was developed: ports, railways and electricity; and finally,
progress in intercontinental transport afforded greater integration
into world markets. In the 1920s, investment boomed in the
continent's three biggest economies: Brazil, Argentina and Mexico.
This investment was financed by debt paper issued on US and
European markets. These countries accumulated huge debts; but all
concerned - lenders, borrowers, financial market operators - were
convinced that exports would indefinitely continue upward,
providing for solid growth and regular debt service payments. The
same reasoning held sway in the 1970s (see Chapters 7 and 9).
It is worth noting that, in 1914, half of industrial exports from the
imperialist centre went to countries that primarily produced and
exported foodstuffs and raw materials. A fundamental change has