The Mexican government's August 1982 threat of default on its external public debt was the trigger that finally unleashed the debt crisis. The net flow of bank lending to Latin America ground to a halt, and the net transfer of resources suddenly turned negative. Even countries like Colombia, which had been prudent about accumulating foreign-debt obligations, were affected as private financial institutions in the developed countries reversed their previously optimistic forecasts concerning Latin America.

The decline in bank lending set in motion a chain of events that was to lead by the end of the decade to a New Economic Model (NEM), based on exports, for the majority of republics. The transition to a new trajectory was not painless and was far from complete even in those countries that were prepared to carry out the most far-reaching program of reforms. Yet countries had few alternatives, for the logic of the situation demanded a response from governments all along the political spectrum. The old growth model, based on a central role for the state in the process of capital accumulation, was attacked on one side by the decline in capital flows to state-owned enterprises (SOEs) and on the other by the emerging consensus in favor of neoliberal economics and a smaller state.

The NEM emerged in part as a pragmatic response to the series of adjustment and stabilization programs adopted in each republic in the 1980s.