Década Perdida

"La Década Perdida" in Spanish or "A Década Perdida" in Portuguese ("The Lost Decade") of Latin America is a term used to describe the economic crisis suffered in Latin America during the 1980s, which continued for some countries into the 1990s. In general, the crisis was composed of unpayable external debts, taxes, and volatile inflation and exchange rates, which in the majority of the countries in the region were fixed.

During the 1970s, the rise in prices of raw materials (primarily oil) and the decrease in the value of the dollar caused US dollars to flow into Latin America, a region that then debated between an industrial model directed from the state or a market based model.

In 1980, the decreased price of raw materials and the rise of interest rates in the industrialized countries generated a lack of resources, which provoked a massive depreciation of exchange rates, appreciating the real interest rate on the debt, a situation made worse by the presence of excessively large bureaucracies.

In response to the crisis, the majority of the nations had to abandon their economic models of industrialization by substituting with imports, and they adopted a growth strategy oriented toward exports. This strategy was encouraged by the International Monetary Fund. There were exceptions, like Chile or Costa Rica, which briefly adopted reformist strategies. The real growth rate of gross domestic product (GDP) for the region was only 2.3% between 1980 and 1985. Between 1982 and 1985, Latin America paid 108 billion dollars in past debts.

In the beginning of the 1990s, Latin America was recuperating from the crisis, which nevertheless reconfigured the economic landscape of the region. The countries who previously were regional leaders like Argentina, Mexico, and Venezuela were left with diverse effects that hadn’t been overcome. Meanwhile countries that had fallen behind previously like Chile, Brazil, Peru, and Colombia stood out in the late 20th century with high economic growth and a better social wellbeing in relative terms.