Which 1982 crisis began when Mexico announced it could no longer service its foreign debt?

The Latin American debt crisis began when Mexico announced in August 1982 that it could no longer service its foreign debt. The announcement threatened a broader international banking crisis because major commercial banks in the United States and Europe had lent heavily to Latin American governments.

During the 1970s, governments across the region borrowed large amounts, encouraged partly by abundant international lending and recycled oil-export earnings. Rising U.S. interest rates, a stronger dollar, recession, and falling commodity prices then made debt repayment far more difficult.

The crisis spread to countries including Brazil and Argentina. International lenders, the International Monetary Fund, and creditor governments negotiated rescheduling and stabilization programs. These measures avoided an immediate collapse of the international banking system but imposed severe economic costs across Latin America.

Although often discussed alongside stock-market turmoil, this was primarily a sovereign-debt and banking crisis rather than a single exchange crash. Its effects included recession, high inflation, reduced investment, and the “lost decade” label for much of the region.