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War and Foreign Debt Settlement in Early Republican Spanish America*

Published online by Cambridge University Press:  13 January 2010

Richard Sicotte  and
Catalina Vizcarra
Richard Sicotte
Affiliation:
University of Vermonta
Catalina Vizcarra
Affiliation:
University of Vermonta
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Abstract

Upon gaining independence, most Spanish American countries had accumulated a substantial external debt, and by 1829 each defaulted. It took decades for these countries to settle their debts and even longer for them to access new loans. We argue that a major factor influencing the pattern of debt service was the incidence of war. War created incentives for governments to channel scarce resources to «emergency» spending and domestic debt service, rather than to the repayment of the foreign debt. Interestingly, we detect an asymmetry between countries long in good standing with creditors and those that had only recently settled. Countries that had established a longer record of continuous debt service were far less likely to default in times of war. We also find that international wars were responsible for the largest effects.

Resumen

En este artículo sugerimos que un factor que determinò en buena medida la trayectoria del pago de la deuda externa de los países hispanoamericanos en las primeras décadas de su vida independiente, fue la enorme incidencia de conflictos armados en la región. Las frecuentes guerras crearon incentives para que éstos dirigieran sus escasos recursos a gastos militares y al servicio de la deuda interna en vez de a la deuda exterior. Un resultado interesante es la asimetría que se registra entre los países que llegaron a renegociar su deuda exitosamente y mantuvieron su servicio por largos períodos de tiempo, y la de aquellos que no tuvieron mayor éxito en sus renegociaciones. En el caso de estos Ultimos, las guerras registraron efectos negativos mayores. También demostramos que las guerras internacionales tuvieron los efectos más dramáticos.

Keywords

Spanish Americasovereign debtdefaultwarhispanoaméricadeuda externadeuda impagadaguerra
Type
Articles/Artículos
Information
Revista de Historia Economica - Journal of Iberian and Latin American Economic History , Volume 27 , Issue 2 , Otoño 2009 , pp. 247 - 289
Copyright
Copyright © Instituto Figuerola de Historia y Ciencias Sociales, Universidad Carlos III de Madrid 2009

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