Simone Selva, US Banks, Transnational Capital Markets, and the Origins of the Debt Crisis: The Case of the Latin American Debtor Nations in the 1970s, in Georges Depeyrot (ed.), Currency, Money and Economic History. Wetteren: Moneta

The rampant ascendancy of private institutional investors gripped on the international borrowing patterns of major world-class borrowers: both western corporations and central banks, as well as non-oil producing and oil producing developing countries increased their borrowing from and dependence on institutional investors and leading private commercial banks. This expansion in international bank lending spurred a staggering upward trend and expansion of international bonds, Eurobonds and, more substantially, Eurocurrency markets. The latter ones were financial assets denominated in currencies other than that of the country where they were held that were traded either by resident banks or by foreign financial institutions. Such increase in deposits to and borrowing from the international money markets sheds light on the linkage between the rise of international bank lending and the changing borrowing patterns of both American and other Western corporations, and the Less Developed countries (LDCs), since the second half of the 1970s and, more intensively, since the end of that decade throughout the 1980s. This contribution aims to explore such linkage by focusing on the specific intertwining between the rampant ascendancy of the Eurocurrency markets and those Latin American developing countries hit the most by the international debt crisis that developed from the very late 1970s throughout the 1980s. Therefore, the importance of the Eurocurrency markets in the development of the Latin American external disequilibria is a case in point to investigate such intertwining between the ascendancy of international money markets and the striking change that marked the borrowing behaviors of major international borrowers. The analysis is limited to the second half of the 1970s and the turn-of-the-decade up to the period prior to the outbreak of the debt crisis: owing to the growing overexposure of leading US banks to the Latin American countries through a variety of lending arrangements, that timeframe is an excellent perspective to embark upon a reconstruction of the ways in which in the following decade transformations in private international bank lending and borrowing activities of major international debtors did interact each other. The involvement of such US commercial banks and financial institutions in the development of the Latin American debt crisis since 1981-1982 is left aside because by that time the interlocking relations between private international banks lending and borrowing patterns of leading Latin American borrowers took place against a new macroeconomic scenario and should be the subject of a specific study.