Austerity Destabilizing Debtors Chile and Peru

In 1984 the poor of Chile and Peru were protesting their governments' lack of response to their crumbling economies. Their governments face steep challenges. The party in power in Peru seemed likely to be removed from office during the coming elections and General Pinochet faced his first real challenge to power. Each of these countries carry heavy debt loads and face Austerity from the IMF. Chile, for instance, owes eighteen billion dollars while their GDP is only twenty billion.

LATIN AMERICAN DEBTORS ARE SPOILING FOR A FIGHT

Argentina's second largest bank failed in May 1985, a victim of IMF imposed austerity. Austerity was imposed to contain rapid inflation which was at 940%. Argentina was not the only Latin American country facing financial problems. Most Latin American economies had been fueled by exports to the United States and were hurt when the US economy slowed.

Political issues complicate the problem. The Mexican government is under pressure to refiat which would worsen inflation. Peru and Brazil both have newly elected governments, both of which plan to fight interest payments as a populist measure.

Summary by Claude Elkins