INTRODUCTION/11countries might find they are unable to raise the huge sums
required for repaying their debts and ensuring their balance of
payments. The Mexican crisis of December 1994 and the East
and Southeast Asian crises of 1997 and 1998 are proof of this.- The growing instability of the global financial system is
heightened by the ease with which market players can acquire
debt paper and currencies and dispose of them when they feel the
need. The 199 7 financial crisis in Southeast Asia subjected the
four 'dragon' economies (Thailand, Malaysia, Philippines and
Indonesia) to attacks from market players that speculated
against their currencies, creating a domino effect that subse
quently hit Hong Kong, South Korea and Brazil. This is further
proof of the systemic instability of the current order. As during
the 1994 Mexican crisis, IMF intervention was required to limit
the damage. But the IMF is not Santa Claus. It provides loans -
with a risk premium on its interest rates - that increase the
burden of foreign debt in the targeted countries. The IMF clearly
comes out on top in such operations.
3 9. There has been an overall increase of financial flows into a few
Third World countries since the beginning of the 1990s. Into
China, whose foreign debt rose by 12 3.2 per cent between 1990
and 1995. Into the four 'dragons' of S outheast Asia, whose debt
rose by 80 per cent between 1990 and 1995. Into the four
'tigers' (South Korea, Taiwan, Hong Kong and Singapore),
whose debt rose by 114.6 per cent between 1990 and 1995.
Finally, into Mexico and Brazil. In all these countries, a new debt
cycle has begun, whose features have already been described.
Until the summer of 1997, the four 'dragons' and South Korea
had no problems meeting their foreign debt obligations. The
crisis that hit during the second half of the year plunged them
into an entirely new situation. Debt servicing has become very
onerous, indeed almost unbearable. China might experience
similar difficulties in the near future (Chapters 5, 14 and 16).
- There has also been a change in the form of debt in the highly
indebted poorest countries (HIPCs). Private banks are no longer
interested in such countries. The main lenders are governments
of the North (bilateral debt) and international financial institu
tions (the IMF, the World Bank and its regional associates: the
African Development Bank, the Asian Development Bank and
the Inter-American Bank for Development). Most debt payments