by DesmondMilesDant
The LDC debt crisis was a major event that occurred in the early 1980s. It began when Mexico’s minister of finance informed the Federal Reserve chairman, the secretary of the treasury, and the International Monetary Fund (IMF) managing director that Mexico would be unable to meet its August 16 obligation to service an $80 billion debt. The situation quickly deteriorated, and by October 1983, 27 countries owing $239 billion had rescheduled their debts or were in the process of doing so. Of that amount, roughly $37 billion was owed to eight largest U.S. banks and constituted approximately 147 percent of their capital and reserves at the time. As a consequence, several of world’s largest banks faced prospect of major loan defaults and failure.