The Balance-of-Payments Crisis and Adjustment Programmes in Central America

  • Victor Bulmer-Thomas
Chapter
Part of the St Antony’s/Macmillan Series book series

Abstract

Four events of unusual significance for Central America occurred in 1979: oil prices rose sharply, world interest rates started to increase, the Sandinista-led revolution succeeded in overthrowing Somoza’s government in Nicaragua, and General Romero was ousted in El Salvador. The first two events had a direct impact on the region’s external payments, but the other two (although usually viewed in political or even geopolitical terms) also had a profound influence on the regional balance of payments. In the years after 1979, each republic at one time or another experienced a major problem of external disequilibrium, and it is for this reason that the title of this chapter refers to the balance-of-payments crisis in the singular.

Keywords

Gross Domestic Product International Monetary Fund Current Account Deficit Real Gross Domestic Product Adjustment Programme 
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Notes

  1. 3.
    See Table I in Bulmer-Thomas, V., ‘World Recession and Central American Depression — Lessons from the 1930s for the 1980s’, in E. Durán, Latin America in the World Depression (Cambridge: CUP, 1985).Google Scholar
  2. 9.
    This point is made very clearly in Bird, G., ‘Balance of Payments Policy’, in T. Killick (ed.) The Quest for Economic Stabilisation (London: Heinemann, 1984).Google Scholar
  3. 10.
    The programme is described in Ministerio de Hacienda, ‘La Reforma Financiera en Costa Rica’, Banco Central de Costa Rica: Serie ‘Comentarios Sobre Asuntos Económicos’, no. 37, 1980.Google Scholar
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  5. 18.
    See Table III in Bulmer-Thomas, V. (1985), ‘World Recession’.Google Scholar
  6. 19.
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  8. 23.
    For a similar argument, see Tseng, W., ‘The Effects of Adjustment’, Finance and Development, December 1984.Google Scholar
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  10. 35.
    The charge that the agreement was politically motivated has been made by several observers; see, for example, Arias Penate, S., El FMI y la Política Contrainsurgente en El Salvador, Cuadernos de Pensamiento Propio (Managua: INIES, 1983).Google Scholar
  11. 38.
    There is a good description of the scheme in Carlos H. González A., ‘Experiencia de Guatemala con el Proceso de Ajuste en 1982–3’, in Centro de Estudios Monetarios Latinoamericanos, Boletín, vol. XXX, no. 3, May–June 1984, pp. 157–65.Google Scholar
  12. 39.
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    See Banco Interamericano de Desarrollo, Informe Económico — Nicaragua, October 1974, Table 12.Google Scholar
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  20. 62.
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  23. 67.
    See PREALC, Producción de Alimentos Básicos y Empleo en el Istmo Centroamericano, Santiago, August 1983, Table 5.Google Scholar
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  26. 75.
    Although the ratio of tax revenue to GDP is the lowest in Latin America outside Haiti, cuts in public expenditure have prevented an explosion in the PSBR which fell by 47 per cent between 1981 and 1984 (see Inforpress, Centroamericana, no. 646, 27 June 1985, p. 2).Google Scholar
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  28. 85.
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Copyright information

© Rosemary Thorp and Laurence Whitehead 1987

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  • Victor Bulmer-Thomas

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