The flow of external resources to the non oil developing countries in the seventies. With special reference to the Brazilian case

Oduro, Abena Daagye (1983) The flow of external resources to the non oil developing countries in the seventies. With special reference to the Brazilian case. MLitt(R) thesis, University of Glasgow.

Abstract

The external debt of the developing countries has become a major issue mainly because of the possible repercussions the debt may have on the international financial system. This situation is a direct function of the changes which have taken place in the international financial system beginning in the late sixties. Before 1975 more than 50% of the external obligations of the developing countries was with the official lenders. There had however, been a shift away to private lenders in the international capital market beginning from the late sixties. The large deficits experienced by the non oil developing countries in 1974 after the first oil price rise as well as the placement of a large percentage of the OPEC revenues in the international capital market encouraged the shift away from official sources of finance to private sources. The banks lent large amounts of finance to a small group of countries so that some individual banks became closely linked with the economic conditions of the borrowing country. The fate of one bank would not necessarily have any effect on the financial system. However, there was the fear that if a country failed to meet its obligations to the detriment of a major bank this would lead to uncertainty in the banking system, leading to some banks moving out from international lending and a decline in interbank lines. The possibility of financial instability was also increased by the possible domino effect which would occur if one large debtor was able to default successfully. As a result of this it was imperative that large debtors which faced payment problems, be helped to resolve these problems so that there was no possibility of a default occurring. The result of these events has been that the large debtors have been put into the limelight. The small debtors may not have large debts to cause undue worry to the banks, in fact some of them may owe very little to the banks. However, in terms of the effect which this debt may have on their external account and domestic economy, they should be no less important than the large debtors. Borrowing by the developing countries is not a new phenomena. It is the concentration of a large amount of debt amongst a few countries, as well as the exposure of some of the banks to these countries which is causing concern. External debt itself is not disadvantageous to an economy. What is important is that the borrowing conditions are such as not to make repayment difficult, and that the external funds obtained are used in such a way as to make repayment possible and not costly to the domestic economy. This implies that an explicit policy may be required before borrowing on a large scale is embarked upon. In the developing country context, although growth may be a necessary requirement for external borrowing to be successful, it is also important that foreign exchange is available for the country to be able to service and repay the debt in the currency stipulated in the loan terms. This introduces a broader aspect to the issue of external borrowing. (For those currencies whose local currency is accepted in repayment this is not a very important issue.) The role of the international economy in the debt repayment process of the developing countries is important in this context. Even if the country may have a favourable export sector policy, if there is no growth in the income of the major trade partners and there is an increase in protectionism it will be difficult for the debtor to repay the required foreign exchange debts. (Abstract shortened by ProQuest.).

• Item Type: Thesis (MLitt(R))
• Qualification Level: Masters
• Additional Information: Adviser: Ljubo Sirc
• Keywords: Economics, Latin American studies
• Date of Award: 1983
• Depositing User: Enlighten Team
• Unique ID: glathesis:1983-72705
• Copyright: Copyright of this thesis is held by the author.
• Date Deposited: 11 Jun 2019 11:06
• Last Modified: 11 Jun 2019 11:06
• URI: https://theses.gla.ac.uk/id/eprint/72705