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Why Not Default?$
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Jerome Roos

Print publication date: 2019

Print ISBN-13: 9780691180106

Published to Princeton Scholarship Online: May 2019

DOI: 10.23943/princeton/9780691180106.001.0001

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Syndicated Lending and the Creditors’ Cartel

Syndicated Lending and the Creditors’ Cartel

Chapter:
(p.124) Eight Syndicated Lending and the Creditors’ Cartel (p.125)
Source:
Why Not Default?
Author(s):

Jerome Roos

Publisher:
Princeton University Press
DOI:10.23943/princeton/9780691180106.003.0009

This chapter considers the Latin American debt crisis of the 1980s. Unlike the 1930s, when debt moratoriums were widespread, the debt crisis of the 1980s was marked by a striking absence of unilateral default. With payment suspensions effectively ruled out as a permissible policy response, debtors and creditors engaged in a concerted effort to reschedule the amortization of principal, refinance maturing obligations and prevent an interruption of interest service at all costs. The chapter shows how the highly concentrated and interlocked nature of syndicated lending contributed to the emergence of a coherent international creditors' cartel that was capable of effectively coordinating collective action among the major Wall Street banks, keeping the debtors in the lending game by rolling over maturing obligations while simultaneously imposing strict market discipline on the borrowing governments through the credible threat of a refusal of further credit in the event of noncompliance.

Keywords:   Latin America, debt crisis, financial crisis, sovereign debt, default, syndicated lending

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