Project

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British banks and the Latin American debt crisis of 1982 - The Case of Consortium Banks

Applicant Alvarez Sebastian
Number 194314
Funding scheme Return CH Postdoc.Mobility
Research institution Historisches Seminar Universität Zürich
Institution of higher education University of Zurich - ZH
Main discipline General history (without pre-and early history)
Start/End 01.11.2020 - 31.10.2021
Approved amount 115'383.00
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All Disciplines (2)

Discipline
General history (without pre-and early history)
Economics

Keywords (5)

Euromarkets; Latin America; Debt crises; International banking; Financial history

Lay Summary (French)

Lead
Quelles sont les interactions entre les États souverains et les systèmes bancaires internationaux et nationaux des pays développés et en voie de développement ? Comment l’internationalisation bancaire affecte-elle l’endettement externe et la stabilité financière des pays débiteurs ? C’est, entre autres, ces questions que ce projet examine à travers la crise de la dette latino-américaine de 1982.
Lay summary

La crise de la dette en Amérique latine a été, en 1982, la première grande crise financière internationale depuis la Grande Dépression. Après le choc pétrolier de 1973, alors qu’une grande liquidité alimentait les Euromarchés et favorisait l’accroissement de l’endettement externe des pays en voie de développement, leurs secteurs bancaires se sont internationalisés et intégrés au système financier international. Tandis que l’implication des banques latino-américaines dans la finance internationale a généré ensuite des problèmes majeurs pour leurs pays, ce sujet a été largement ignoré par les historiens, les économistes et les politologues qui ont travaillé sur la crise.

Initiée en 2018 avec une bourse Postdoc Mobility, cette recherche vise à combler cette lacune en examinant les archives des banques britanniques fortement impliquées en Amérique latine. Sur la base d’une riche collection de documents historiques sur le Brésil - le plus important emprunteur international, le projet a débouché sur deux articles : a) le premier sur le rôle de la régulation bancaire comme mécanisme de contrôle des risques liés à l’internationalisation financière ; b) le second sur les effets de l’endettement externe sur la gestion de la politique monétaire et de la balance de paiements de la part des autorités financières. Il s’agit dans cette phase de retour en Suisse de terminer la rédaction des articles, ainsi que d’étendre l’étude au cas de banques de consortium spécialisées en Amérique latine sur la base d’un fond d’archives inédit trouvé aux archives de Barclays Group. Une fois que les articles seront achevés, en fin 2021, le matériel archivistique rassemblé servira de base à la rédaction d’une monographie.

Direct link to Lay Summary Last update: 25.06.2020

Responsible applicant and co-applicants

Name Institute

Employees

Name Institute

Publications

Publication
International banking and financial fragility: the role of regulation in Brazil and Mexico, 1967–1982
Alvarez Sebastian (2021), International banking and financial fragility: the role of regulation in Brazil and Mexico, 1967–1982, in Financial History Review, 28(2), 175-204.

Collaboration

Group / person Country
Types of collaboration
Graduate Institute Geneva Switzerland (Europe)
- Publication
Rutgers University United States of America (North America)
- Publication
University of Oxford Great Britain and Northern Ireland (Europe)
- Publication

Scientific events

Active participation

Title Type of contribution Title of article or contribution Date Place Persons involved
Research Colloquium of the Chair for History of the Modern World Individual talk The Shadow Central Bank: Banco do Brasil and International Finance, 19641982 01.07.2021 ETH Zurich, Switzerland Alvarez Sebastian;
Seminário de Economia Política e História Econômica Individual talk Shadow central banking and international nance in Brazil, 1973-1982 24.06.2021 Escola de Economia de Sao Paulo - FGV, Brazil Alvarez Sebastian;
The Politics of Finance: Creditworthiness, Credibility and Reputation on Global Markets Talk given at a conference International Finance, Monetary Governance and BoP Management in Brazil, 19641982 17.06.2021 Genève, Switzerland Alvarez Sebastian;
AEHE XIV Encuentro de Didáctica de la Historia Económica Talk given at a conference Banca doméstica, crisis de deuda y renegociación: El caso de México en 1982 11.06.2021 Granada, Spain Alvarez Sebastian;
Economic and Social History Seminar Individual talk Shadow central banking and international nance in Brazil, 1973-1982 08.06.2021 University of Oxford, Great Britain and Northern Ireland Alvarez Sebastian;
Money, History and Finance Rutgers Workshop Individual talk Foreign Exchange Regimes and Balance-of-Payment Management in Brazil, 1964-1982 26.04.2021 Rutgers University, United States of America Alvarez Sebastian;
EHS Annual Conference Talk given at a conference The Shadow Sovereign Lender: Banco do Brasil and Balance-of-Payment management, 1964-1982 06.04.2021 Warwick, Great Britain and Northern Ireland Alvarez Sebastian;
Geschichtskontor Individual talk The Shadow Central Bank: Banco do Brasil and International Finance, 1964-1988 17.11.2020 University of Zurich, Switzerland Alvarez Sebastian;


Abstract

The Latin American debt crisis of the 1980s was the first major global financial fallout since the Great Depression of the 1930s. After lifting capital controls with the end of Bretton Woods and the oil shock of 1973, as large revenues from oil exporting countries were invested in the world capital markets, international commercial banks became increasingly involved in foreign lending to the developing world with Latin America attracting the lion’s share. The boom of international credits and external indebtedness led to a wave of sovereign defaults after the Mexican government announced the moratorium of its payments in August 1982, jeopardizing the stability of the international financial system because of the dangerous exposure of the world largest banks to debtor countries. The debt management strategy adopted by IMF and creditor governments from industrial countries to deal with the crises plummeted Latin America into its worst development crisis in history - the well-known ‘lost decade’. Initiated in 2018, this research project aims to revisit the origins and dynamics of the Latin American debt crisis of 1982 based on recently disclosed archival material. While an extensive and rich corpus of literature exists from the time of the crisis or immediately after, the project explores primary sources from leading British banks as major international financial players to provide new historical insights. It focuses more specifically on the collection and records of Britain’s “Big Four” banks Lloyds, Midland, NatWest and Barclays during the lending boom that preceded the crisis and the subsequent debt renegotiation process, particularly with respect to the financial operations and business arrangements with their Latin American counterparts. The project builds on previous research where I have shown the crucial, though neglected, role of Mexican banks in the crisis and looks to extent the analysis to other Latin American countries whose banks were also participating in the international capital markets and relying on British, European and US banks funding to conduct their international activities.The research into British banks conducted during the Postdoc Mobility in Oxford has propelled me in two valuable directions: The Brazilian crisis and consortium banks. Based on rich historical records and archival collections on Brazil - the largest international borrower, my work has focused so far on the crisis the country experienced in 1982 and, as a result, two articles are currently in preparation. While allowing me to finish-up the articles-in-progress back in Switzerland, this return grant will also pursue new research on consortium banks. Created in the 1960s and 1970s by a strategic alliance of other banks, these banks gained significant presence in the main world financial centers and became prominent international lenders during the run-up to the 1982 debt crisis. This stream of research proposes to explore a special collection of files on the European-Latinamerican Bank (Eulabank), one of the largest consortium banks with specialization in financial services to Latin America, hold at the Barclays Group Archives. Jointly created and operated by a group of Latin American and European banks with 50 percent ownership each side, this bank provides an excellent case of study for the purposes of this research project.The contribution of this project is threefold. First, it analyzes the interactions between sovereign states and the international and domestic banking systems that has been overlooked by historians, economists and political scientists but had a central role in the creation of the crises of 1982 and their resolutions. Second, it highlights the differences as well as the commonalities among the national financial crises that disrupted Latin American economies for more than a decade through comparatives individual and comparative case studies. Finally, it provides a new historical analysis of the Latin American debt crisis of 1982 that is only now possible to undertake.
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