Debt and Structural Adjustment in Central America

Abstract

An in-depth treatment of foreign debt in Central America requires consideration of the structural characteristics of the economies of these societies. Contrary to what is often thought, the problem of foreign debt in the region has been developing over several decades and is not in any way the exclusive result of inappropriate macroeconomicpolicies. The first proposition is that the process of indebtedness in the region has been historically associated with the needs and contradictions which marked the process of modernization of dependent capitalism in Central America. This has been true of the economic process in the region, even during the boom of the 1 960s and 1 970s. The empirical evidence is conclusive: Between 1960 and 1970 the public foreign debt of Central America multiplied thirtyfold (CEPAL, 1986a: 53-54). Ultimately, these contradictions are explained by the unique qualities of the process of consolidation of the bourgeois order in Central America. Here the transition from an initial exporting stage toward an industrially based economy following World War 11 was an imperfect process, incomplete and subordinate to foreign capital. Many of the oligarchic features of this relationship of domination spread without incurring any fundamental changes (Torres-Rivas, 1987). The consolidation of the essence of fundamental accumulation with respect to the foreign sector, and to a lesser degree the captive domestic market distorted by the extreme concentration of income, impeded an alternative structuring of the economic fabric which would have prioritized intersectorial cohesion, internal equilibrium, and the reproduction of dynamic comparative advantages.