SOURCE: Financial Times (UK)
comments powered by Disqus
Guillermo Ortiz: Lessons from Latin America for Greece
The writer is chairman of GrupoFinancieroBanorte, and formerly governor of Banco de México and Mexican minister of finance.
For many observers who lived through the constant debt-rescheduling processes of Latin American countries in the 1980s it is difficult to regard the latest episode of the Euro-Hellenic drama without experiencing a sense of déjà vu.
Last week, once again, a new plan was devised by the troika of the European Commission, the International Monetary Fund and the European Central Bank to keep Greece funded and avoid default in the short term, while its economy continues to plummet with no end in sight. After two rescue programmes, along with the largest debt restructuring in history, Greece remains insolvent and eurozone leaders refuse to recognise the need for a new approach. To achieve solvency, a serious debt-relief plan, conditional on structural reform, should be implemented to shift the emphasis from fiscal austerity to recovering economic growth and restoring market confidence. It is time for the IMF to assert a commanding role away from European leaders’ short-term political incentives and achieve a credible strategy out of the Greek crisis.
During the Latin American “lost decade”, the region experienced a series of economic crises that brought several countries to the brink of default. Rescue funds were provided through commercial banks, which were governments’ main financing source, the IMF and other multilateral agencies – the 1980s equivalent of today’s troika – to avoid this scenario. Throughout the decade, the region’s debt profile deteriorated continually as the fund failed to address the issue of insolvency and treated the problem as one of illiquidity. Every year the IMF would project gross domestic product to rise and debt-to-GDP ratios to fall, sustaining the illusion that these countries were not fundamentally insolvent. Every year the opposite occurred.
This surreal dynamic ended with the Brady plan, launched in 1989, which provided new financial instruments to help governments regain market access and diversify sovereign risk away from commercial banks...
comments powered by Disqus
- Most Millennials Resist the ‘Millennial’ Label
- Isis profits from destruction of antiquities by selling relics to dealers – and then blowing up the buildings they come from to conceal the evidence of looting
- China military parade commemorates WW2 victory over Japan
- New documentary explores the legacy of the 5,000 Rosenwald schools set up by a Sears magnate and Booker T. Washington
- Rare silent Native American movie of 1920s attracting a lot of interest
- AHA President Vicki L. Ruiz named National Humanities Medalist
- Historians of Color Are Revolutionizing the Narrative of ‘American Exceptionalism’
- Henry VIII voted worst monarch in history
- The Fuhrer style: Historian says press coverage of Hitler’s lavish life fueled his rise to power
- Two scholars from UT object to the Texas school's decision to remove the statue of Jefferson Davis