How Did the Debt Crisis Come About?
The beginning of the international debt crisis is usually said to have begun in 1982 when Mexico announced that it could not keep up the payments on its foreign debt. This sent shock waves through the international financial community because they feared other countries would do the same. The immediate cause of the crisis occurred in 1973 when the members of the Organization of Petroleum Exporting Countries (OPEC) quadrupled the price of oil and invested the money in commercial banks. The banks, seeking investments for their new funds, made low interest loans to developing countries, often without appropriately evaluating the loan requests or monitoring how the loans would be used. Due to the irresponsible practices of creditors as well as debtor governments, much of the money borrowed was spent on programs that did not benefit the poor. However, with large amounts of money available for low interest loans, this was a good time for developing countries to borrow. In 1979, OPEC raised o
