Author(s): Lopez Maya M
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Abstract PIP: The decade of the 1980s was catastrophic for the countries of Latin America because of profound transformations in the world economy, which started in the 1970s, the wilting of the state development programs that were imposed after World War II, and the collapse of socialism with the incipient transition to market economies. The crisis started because of the erosion of the world economic system as constituted under the Bretton Woods agreement; the drastic drop in the economic growth of market economies; the increased costs of living and the deterioration of the environment; the decrease in industrial capacity; and the emergence of transnationalization of production. In Latin America, the economic models that had been in place without solving underdevelopment became even more obsolete (import substitution, internal trade, and the role of the state). The crisis of socialism and the rapprochement of eastern European countries to western Europe also affected Latin America (e.g., Germany cancelled 30 mine exploration projects in Bolivia due to investments in East Germany). The structural readjustment policies of the International Monetary Fund and the World Bank resulted in currency devaluations, redistribution of government funds, elimination of various subsidies, reduction of public debt and social expenditures, reduction of public employment, and payment of external debt. The result was more inflation (in Bolivia, Brazil, Peru, and Argentina, inflation rates were 683.7\%, 157.1\%, 100.1\%, and 326.2\%, respectively, between 1980 and 1986), unemployment, and poverty in the lost decade of the 1980s. After 1982, state expenditures on roads, education, hospitals, and nutrition declined by 40\% in Mexico. Even though most countries returned to democracy in the region, this was at the cost of the increased role of the military and the transnationals. The grand parties collapsed and in Venezuela, Mexico, and Colombia authoritarian tendencies survived into the 1970s degrading democracy. The states' socioeconomic regulatory role has to be redefined.
This article was published in Cuad CENDES
and referenced in Journal of Stock & Forex Trading