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... to continue to provide new loans. This heavy borrowing led Latin American economies to quadruple its external debt from $75 billion in 1975 to more than $315 billion in 1983. When the world economy was falling into recession in the 70s and 80s, oil prices increased sharply creating a breaking point for most countries in the region. Petroleum exporting countries made huge profits after the oil price increases of 1973-74 and decided to invest their money with international banks as loans to Latin American governments (petrodollars). When the United States of America increased interest rates debt payments also increased making it harder for borrowing countries in Latin America to pay back their debts. This occurred in August of 1982 when Mexico's Finance Minister announced that Mexico would no longer be able to service its debt. After this information most of commercial banks reduced significantly lending to all Latin American ...