ABSTRACT
The original causes of their growing foreign indebtedness differ for the three major Latin American countries, Argentina, Brazil, and Mexico. For a significant length of time, Argentina maintained an overvalued exchange rate that was an inducement to capital flight, and made substantial purchases abroad of military hardware. Mexico did the same regarding foreign exchange rate and placed too great expectations on oil exports as a booming business, therefore concentrating too much investment on exploration and drilling and failing to diversify its economy. As a heavy oil importing country, foreign indebtedness was Brazil's response to the oil shocks. It aimed at maintaining a constant physical volume of imported energy until domestic production could be expanded and at financing an ambitious process of import substitution in terms of basic raw materials and local production of capital goods.
