Abstract

External debt problems, like wars, are common occurrences in a broader historical
perspective. They occur every thirty or fifty years, much in the same circumstances. And
when they do occur, they put at odds the bondholder and the debtor and leave fundamental
imprints on history, though perhaps not, in any lasting fashion, on the memories of lenders.
Hitler’s Germany or Latin America’s import substitution philosophy was the outgrowth of
the last world debt crisis. Today Latin America is once again in a debt crisis and the debate
puts in confrontation those who call for dramatic action, including even repudiation, and
others who suggest the problem is minor and that it can be solved by time, adjustment, and
some typing-over finance – the muddling through strategy.

JEL Classification: F34; N16; N26.