Mexico experienced the 1982 debt crisis that triggered a major stock-market and banking shock across Latin America.
On August 20, 1982, Mexico announced that it could no longer service its external debt on schedule. The announcement alarmed international banks because Mexico was one of the largest borrowers among developing countries. Other Latin American governments soon faced difficulties refinancing dollar-denominated loans.
The crisis followed years of heavy borrowing, high international interest rates, recession in developed economies, and falling export earnings. Mexico’s oil revenues and borrowing capacity had been particularly important to its economic strategy, but changing conditions made debt payments increasingly difficult.
The resulting decade is often called Latin America’s lost decade. Governments adopted austerity and restructuring programs, while commercial banks and international institutions negotiated rescue packages. The episode was a sovereign-debt crisis rather than only an exchange-floor crash, but it caused severe financial-market disruption.