Written from a South American perspective by a staff economist of the U.N. Economic Commission for Latin America and the Caribbean, this substantial study argues that Latin America's debt crisis of the 1980s and the resulting regionwide recession are owed largely to the role of commercial banks, which overexpanded credit and then overcontracted when the region's liquidity problems became evident. Devlin argues that there was an inherent tendency of unregulated banking to overlend in the 1970s, and that conversely in the 1980s the banks shifted to underlending "primarily designed to protect the loan portfolios of the banks at a disproportionate cost for the debtors." In a final chapter of policy prescriptions, Devlin urges Latin American debtors to defend their own economic interests by developing new payment options, including unilateral limitation of debt service.
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