THE WORLD BANK AND THE THIRD WORLD DEBT CRISIS/129approach: as we have seen, the prices of exported goods plummeted
in the 1980s at the same time that interest rates rose sharply. This
led to the financial asphyxiation of indebted countries. As for
McNamara, he stepped down as president of the World Bank in 19 81,
a few months before the crisis exploded in everyone's faces.
THE WORLD BANK'S TUNNEL VISION
Although the debt crisis only burst out into the open in August 1982,
there had been no shortage of ominous signs. Warnings had been
made. Still, the World Bank obviously underestimated the dangers of
the situation. One need only look at its 19 81 annual report on global
development: 'These trends suggest it will be more difficult for
developing countries to manage their debt, but they do not presage any
generalised problem. This analysis is confirmed in projections for the
balance of payments in the 1980s, based on various probable
scenarios' (emphasis mine).
The 1982 report was released ] ust a few weeks before the explosion
of the Mexican crisis. It provided an even more blinkered and
optimistic analysis of the situation (Edwards, 1995). In its 1983
report, the World Bank said that there were liquidity problems that
had only affected specific countries, and not entire regions or groups
of countries. Yet about 30 countries followed closely in Mexico's
footsteps. The 1984 report provided optimistic projections until 1990
in the relationship between Latin American export earnings and
debt-service payments. In fact, the exact opposite occurred (Edwards,
1995). For a number of years, the Bank continued to promote the
illusion that the debt crisis was above all a liquidity crisis, instead of
recognising that the debtor countries were actually insolvent. These
debtor countries were not simply experiencing liquidity problems,
they were in the midst of a fully-fledged crisis, of a long-term
structural nature.
In 19 8 6, with the debt of developing countries well in excess of one
SI trillion (SI,000 billion), the Bank said that by the mid-1990s this
debt total would at the very worst be on the order of S 8 64 billion. By
1995, however, total Third World debt was SI,940 billion - double
the forecast amount.
The IMF made exactly the same errors. In its quarterly report
Economic World Outlook of April 1982, the IMF said that, in spite of a
number of payment problems, Latin America would obtain major