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Abstract
Latin American countries are important customers in international agricultural trade.
However, between 1981 and 1987, U.S. agricultural exports to these countries declined by
almost 50%. One explanation for the above decrease is the change in financial conditions
facing many countries in this region. Outstanding debt in the Latin American countries
continued to rise through the 1980's, reaching over $120 billion for Brazil and Mexico by
1987.
In this paper, we develop an import model which considers the effect of the debt crisis
on the ability of developing countries to purchase agricultural commodities in world
markets. We estimate the model for four countries: Mexico, Brazil, Chile, and Venezuela.
The estimated results are used in a simulation model to obtain the effects of a 50% debt
forgiveness scenario. Results indicate only a modest improvement in agricultural imports of
the four Latin American countries considered in this study. These four countries would
expand agricultural imports by $400 million per annum given the debt reduction.