Public Debt Crises in Latin America and Europe : Two Tales

The debt problems of Latin America in the 1980's were of external origin, were related to external borrowing, exploded when international interest rates hit a historical high, were basically international commercial bank loans in floating rate notes, and had a negative impact on the balance of payments. They were solved with the Brady Plan after a decade of falling output while having multilateral IFIs conditionality, adjustment policies, structural reforms and financing. The European crisis that started in 2007 is also of external origin, is related to domestic borrowing, exploded when the US subprime crisis hit the international financial community, is basically privately held in bonds by European financial institutions in Euros, and has had a negative fiscal impact. The debt solution in Latin America changed the process of economic and trade integration begun in the late 1960's through ALADI as export led policies were introduced, into four sub regional schemes: NAFTA, SICA, MERCOSUR and CAN. In this paper we are going to inspect the economic elements of the two sets of debt problems, the international political economy elements involved and the lessons learnt