External finance and commercial banks. Their role in Latin America’s capacity to import between 1951 and 1975

Since the mid-1960s a radical change has come about in international financial flows which has placed commercial banks at the heart of the process. It is they that handled substantial funds deriving from the expansion of the Eurocurrency market and later recycled a considerable portion of the surpluses generated by OPEC; and for several reasons, paramount among which is the expectation of profit, they have channelled a considerable proportion of these resources towards the developing countries. The article analyses the positive and negative effects of this process on the nations in question. On the one hand, it has relieved the external bottleneck, increased the capacity to import, provided incentives to investment and economic growth, made it possible to weather the oil price crises, and afforded freedom from the constraints of official loans. Hut, on the other hand, it has also increased dependence upon foreign capital and debt service requirements, and has ‘commercialized’ development financing, this last consequence generally implies more onerous loans with variable rates of interest, shorter terms, less tolerance, ‘commercial’ criteria for estimating a country’s creditworthiness, and intervention of banks in government policy. In face of these negative effects, the author proposes a series of remedial measures, of which the most outstanding is to augment the available funds of multilateral financial institutions with resources from the central countries and from OPEC.