The North’s New Debt Trap for the South

Latin America and the Caribbean are facing a serious debt crisis

Part 4

3 May 2021 by Eric Toussaint , Milan Rivié

In the previous three parts we have observed the evolution of the DCs’ external debt over the last twenty years. The first part shows a dramatic increase of indebtedness, which multiplied by 2.5 with a steep acceleration from 2008 onward. The second part highlights the main threats on the DCs’ external debt, among which the growing significance of bonds, the evolution of interest rates and the depreciation of their currencies against the US dollar. The third part examines the various factors that lure DCs into the debt trap: dependence on commodities, drop in foreign exchange reserves, inflating repayments, conjuncture of a multi-dimensional crisis aggravated by the Covid-19 pandemic, etc.

We deepen our analysis by focusing on various regions, starting with Latin America and the Caribbean.

 1. All DCs - General focus

Graph 1: Comparison between loaned and repaid amounts per year (long-term total external debt – in billions of US$)

Graph 2: Comparison of the evolution of total debt stock Debt stock The total amount of debt with net transfers (long-term total external debt – in billions of US$))

Echoing table 1 in our first part, graph 1 compares borrowed amounts (in orange) and repaid amounts (in blue – also called debt servicing) on long-term total external debt per year. Graph 2 presents the evolution of the debt stock (in orange – scale on the right) and of net transfers (in blue – scale on the left).

As formerly mentioned, from 2000 to 2006, debt servicing outreached borrowed amounts while the debt stock increased only moderately. Net transfer was generally negative. In the following period from 2008 to 2019 net transfer became positive. We notice an exception in 2015 when commodity prices plummeted. As a rule both debt stock and debt servicing have increased dramaticaly.

 2. Latin American and Caribbean region

Population in Latin America and the Caribbean in 2019: 646 million, among which, population of DCs: 613 million.

List of 25 Dcs: [1]

  • 1 low-income country: Haiti
  • 24 middle-income countries: Argentina, Belize, Bolivia, Brazil, Colombia, Costa Rica, (Cuba), Dominican Rep., Dominica, Ecuador, Grenade, Guatemala, Guyana, Honduras, Jamaica, Mexico, Nicaragua, Paraguay, Peru, Saint-Lucia, Saint-Vincent and Grenadines, Salvador, (Suriname), Venezuela

List of high-income countries (not DCs): Antigua-&-Barbuda, Aruba, Bahamas, Barbados, British Virgin islands, Caiman islands, Chile, Curaçao, Panama, Porto Rico, Saint-Kitts-&-Nevis, Saint-Martin (French), Saint-Martin (Dutch), Trinidad-&-Tobago, Turks and Caicos islands, Uruguay, US Virgin islands.

Note that the WB World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

classification can be questioned. However, we decided to use it to accommodate easier use of WB data. For a critical approach to the categories used by international institutions, see: ‘South/North / Developing Countries/Developed Countries – What is it all about?’

Graph 3: Evolution of the public external debt of the Latin American and Caribbean Region by creditors (in billions of US$)

In the graph above, we can see the two periods previously referred to, a reduction of debts from 2004 to 2006 with an increase in revenues along with an increase in commodity prices, followed by a constant increase of the debt from 2007 onward. We can also distinguish four categories of creditors:

Graph 4: Comparison between the evolution of the total debt stock and of the net transfers on the public external debt of Latin America & the Caribbean (in billions of US$)

Remember that the net transfer refers to the difference between what a country receives as loans and what it pays out (capital and interests included, also called debt servicing). If the amount is negative, then it means that the country paid out more than it received.

In the graph columns in orange refer to net transfer.

DCs’ public external debt in 2000: $406 billion
DCs’ public external debt in 2019: $984 billion

DCs in the region with a high risk of overindebtedness in February 2021 [3] : Dominica, Haiti, Saint-Vincent & Grenadines.
DCs in the region in suspension of payment in February 2021: Argentina, Cuba, Grenade, Suriname and Venezuela.

From 2000 to 2019, the region’s public external debt multiplied by 2.43. Over the same period the net transfer was positive (+$33.53 billion). From 2000 to 2008 net transfer was negative: -$188.62 billion, i.e. 4.5% of the region’s DCs GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
in 2008. Financial crises in the North and capital flowing to countries of the South largely account for the positive net transfer over the following years.

It is emblematic of the economic difficulties those countries had to face that while their GDP doubled from 2000 to 2008 (from $2,085 to 4,203 billion) it only increased by 20% from 2008 to 2019 ($5,149 billion).

It is also significant that all 22 DCs of the region except Guatemala and Venezuela, and of course Cuba called upon the IMF over those twenty years; they borrowed $135 billion from the IMF and have repaid $105 billion, including 12% in interests alone.

Among the countries that have been most badly hit by the IMF loans and austerity policies are Argentina, Ecuador, Haiti and Suriname.

The evolution of the DCs’ public external debt by categories of creditors in the region corresponds with the general picture for DCs, i.e. a limited share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. of bilateral and multilateral loans, and a steep increase of the share owed to various kinds of private creditors, particularly of sovereign bonds sold on financial markets, most often Wall Street, from 2008 onward. Except for Haiti, a low-income country, the other countries can borrow on the financial markets.

While the region is not the one in the world that most depends on commodity exports, 17 countries are still highly exposed to price fluctuations that affect their export revenues. This applies to the exportation of agricultural products (Argentina, Belize, Brazil, Ecuador, Guatemala, Paraguay, Uruguay), fossil fuels (Bolivia, Columbia, Ecuador, Mexico, Saint-Lucia, Trinidad & Tobago, Venezuela) and ores (Chile, Guyana, Jamaica, Suriname). [4]

From 1 March 2020 to 1 January 2021, the currencies of the region also steeply depreciated against the US dollar and the euro, the two main foreign exchange currencies. The currencies of only four countries (Bolivia, Chile, Colombia, Honduras) appreciated compared with the dollar, in a range from +0.37% to +14.88%. Conversely the currencies of a vast majority of countries depreciated, in a range from -1.97% (Nicaragua) to -92.90% (Venezuela). The region’s three economic drivers, Argentina, Mexico and Brazil, lost 26.05 points, 0.94 points and 13.65 points respectively. [5] Except for Chile (+2.77%), the currencies of all countries in the region depreciated compared with the euro.

Graph 5: DCs’ debt servicing in the Latin American & Caribbean region (in billions of US$)

Over twenty years, debt servicing needs in the region literally exploded, as it moved from $72.86 billion to $143.74 billion). In 2019, 43% of those DCs devoted more resources to debt servicing than to health expenditure (Argentina, Belize, Dominica, Ecuador, Grenade, Haiti, Jamaica, Salvador, Saint-Vincent & Grenadines). Debt servicing on those 10 countries amounted to between 6.7% and 38% of State revenues. [6]


Public debt has steeply increased in Latin America and in the Caribbean. The global economic crisis makes repayment more difficult. While the continent is deeply affected by the coronavirus pandemic with over 235,000 deaths in Brazil, over 170,000 in Mexico, over 56,000 in Colombia, over 50,000 in Argentina, over 41,000 in Peru, [7] suspending debt repayment is more justified than ever. It is in fact a sine qua non condition to rechanneling public spending and relieving the consequences of the pandemic, the impact of the economic crisis, and the climate crisis.

The series continues with analyses of how indebtedness developed in other regions of the Global South.

Translated by Snake Arbusto, Vicki Briault, Mike Krolikowski and Christine Pagnoulle (CADTM)



[1The region consists of 42 countries. Countries between brackets are not taken into account in the WB statistics about the debt. Remember that Cuba is not a member of either the World Bank or the IMF.

[2Although it is also, a multilateral creditor, the IMF is not noticed as a multilateral creditor in the WB data base.

[3List of LIC DSAs for PRGT-Eligible Countries As of January 31, 2021 :

[4UNCTAD, State of commodity dependence 2019, pp. 3-4.

[5, accessed 11 February 2021.

[6Jubilee Debt Campaign, « Comparing debt payments with health spending », April 2010,

[7All figures are from and were accessed on 11 February 2021.

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012, etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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Milan Rivié

CADTM Belgium
milan.rivie @
Twitter: @RivieMilan

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