The setup is always the same.
Emerging markets borrow heavily in dollars when rates are low and the dollar is weak. Cheap credit, low monthly payments in local currency terms. Governments, corporatio...
August 1982: Latin American Debt Crisis
The DXY hit 120 — its highest level in decades. Paul Volcker had jacked US rates to 20% to break inflation. That crushed the dollar cost of servicing debt for countries like Mexico, Brazil, and Argentina.
Mexico defaulted on August 12, 1982, triggering a cascade across Latin America. Over $300 billion in sovereign debt went into arrears. The region spent the next decade — the "Lost Decade" — in austerity and restructuring.
The dollar's strength was the mechanism that broke them.
The DXY hit 120 — its highest level in decades. Paul Volcker had jacked US rates to 20% to break inflation. That crushed the dollar cost of servicing debt for countries like Mexico, Brazil, and Argentina.
Mexico defaulted on August 12, 1982, triggering a cascade across Latin America. Over $300 billion in sovereign debt went into arrears. The region spent the next decade — the "Lost Decade" — in austerity and restructuring.
The dollar's strength was the mechanism that broke them.
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