Latin American debt crisis

A letter and three phone calls

On 12 August 1982, Mexican finance secretary Jesús Silva Herzog sent creditors a letter stating that Mexico could not pay principal falling due on Monday, 16 August.

He then telephoned IMF managing director Jacques de Larosière, Federal Reserve chairman Paul Volcker and U.S. Treasury secretary Donald Regan to report exhausted reserves and the inability to meet the obligation — and flew to Washington with other officials to seek emergency assistance in person.

The same day, at home

Mexico closed its exchange markets, required dollar-denominated bank deposits to be paid in pesos, and set an official rate of 69.5 pesos per dollar against roughly 75 in the market.

Debt negotiator José Ángel Gurría had reported that banks were refusing to roll over principal. The GAO puts the external debt at about US$80 billion, roughly US$25 billion of it owed to U.S. banks.

Not an announcement, and not yet a regional crisis

The listing’s “announces it is unable to pay” compresses a private sequence: a creditor letter, calls to three of the world’s most powerful financial officials, and exchange-control measures.

Mexico said it could not meet imminent principal payments. It did not repudiate its debt, and no legal insolvency was adjudicated.

The 90-day standstill request came later, at a meeting with commercial creditors on 20 August, and the wider Latin American debt crisis unfolded over the following months rather than spreading before 12 August was out.