Latin American debt crisis

A wave of sovereign defaults in the 1820s, when newly independent Latin American states could not service foreign loans raised during and after independence wars.

Sovereign default: A government’s failure to meet its debt obligations as promised. The crisis consisted of multiple new states suspending or missing payments on foreign debt.
Latin American wars of independence: The conflicts through which Spanish and Portuguese American territories broke from European rule in the late eighteenth and early nineteenth centuries. New states inherited wartime disruption and faced immediate costs of establishing sovereignty.
Argentina: A country in southern South America whose modern state developed from former Spanish colonial territories. The government associated with Buenos Aires suspended payments on its 1824 loan in 1827.
Rothschild family: A European banking family whose firms became major financiers of governments and international trade. Rothschild houses later negotiated and arranged financing connected to Latin American sovereign debt.
Foreign borrowing: Government financing obtained from lenders outside a country’s borders. New republics borrowed heavily in London to fund governments and reconstruction.
London Stock Exchange: A major financial market in London where securities, including foreign government bonds, were traded. London was the principal market for loans floated by the new republics.
Chile: A country on South America’s Pacific coast that became independent from Spain in the early nineteenth century. Chile defaulted on its 1822 foreign loan during the regional wave of payment suspensions.
Foreign bond: A debt security issued by a borrower in a market outside its home country. The defaulted obligations were largely bonds sold to overseas investors.
Commodity price: The market price of a raw material or primary product traded in bulk. Falling prices and export receipts reduced the hard-currency earnings available for debt service.
Barings Bank: A British merchant bank founded in 1762 that financed trade and governments, including Latin American borrowers. British merchant banks helped arrange loans to newly independent states.

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