THE DEBT CRISIS IN HISTORICAL PERSPECTIVE/75taken place from at least as far back as the 1970s. Imperialist
countries largely export to one another.
In 1914, half of the periphery's exports went to only four countries
of the centre: Britain, Germany, France and Belgium. If Italy, Japan,
the US and Austria-Hungary are Included, 70 per cent of the
periphery's exports at the time are accounted for.
In 1928, Investment flows slowed down considerably due to the
saturation of financial markets by Latin American securities. Very
soon after the 1929 stock market crash, no more such paper was
Issued. With the financial tap closed tight, Latin American countries
could no longer meet their debt obligations.
The Suspension of External Debt Payments by 14 Latin
American Governments
On 1 January 1931, the Bolivian government announced It would
stop Its debt payments. A number of other countries followed suit
(Vilas, 1993;Ugarteche, 1997).By 1932,12 countries had partly or
fully suspended debt payments; by 19 3 5, there were 14.
The decision to suspend payment was based primarily on the fall
In the price of exported products (Flshlow, 1985) and on the drying
up of Investment from Imperialist countries (see above).
There Is a striking contrast with the situation 50 years down the
road. One-third of all Latin American countries unilaterally
suspended debt payments In the 1930s. In general terms, this
decision proved to have been the right one. Most of the countries that
ended debt payments experienced renewed economic growth In the
1930s In spite of the halt In foreign lending. Following the Second
World War, the multilateral world trading system was put back on
Its feet; yet this did not reopen private capital markets to Latin
American borrower countries. Alternative channels were put In
place at Bretton Woods In 1944. Multilateral government loans took
the place of financial markets. It was only 20 years later, In the
1960s, that private banks In the centre began lending directly to
Latin America.
For a while, then, Latin American countries kept the International
financial system at arm's length. Even those countries that had never
stopped debt payments realised It was unlikely that global financial
flows could work In their favour. Financial disarray In the US Itself
heightened such feelings. Furthermore, the war between the main