The dilemma faced by developing countries
Dependence on developed countries
In order to consolidate their political independence, the Asian, African, and Latin American countries that became independent one after another after the World War II have put the development of their national economies and the task of striving to industrialize in the first place. to give top priority to the development of national economies and the pursuit of industrialization. However, most of the developing countries are still in a subordinate position because the western developed countries stubbornly maintain the old international economic relations and exploit and control the developing countries by taking advantage of their technological and economic superiority. This dependence is manifested in the following aspects:
In the field of production, the international division of labor inherited from the period of colonial rule has not been fundamentally broken. Western developed countries monopolized the production of manufactured goods, and the developing countries remained the suppliers of raw materials to the former sovereign countries. Until the early 1980s, there were still a large number of developing countries that mainly produced raw materials and primary products, with more than 30 of them accounting for more than 90 per cent of their total exports of primary products. This made the developing countries heavily dependent on the Western developed countries in terms of capital, technology, manufactured goods and consumer goods. Moreover, with the development of the scientific and technological revolution, the transnational corporations, which are the main tools of the monopoly capital of the western developed countries to promote economic hegemony, have transferred some of the labor-intensive and capital-intensive industries to some developing countries and regions while expanding their direct investment in the developing countries, so that they have become the subsidiary "processing factories" and "assembly factories" of the developed countries. They have become subsidiary "processing plants" and "assembly plants" of developed countries. The traditional division of labor, which used to be a single type, has been transformed into a multi-level international division of labor system, in which the western developed countries are at the top of the system, while most developing countries are at the bottom.
In the field of technology, Western multinational corporations, through their monopolization of technological research and sales, have created a technological dependence of developing countries on the West. In the transfer of technology, Western countries not only severely restrict the transfer of advanced or key technologies to local companies in developing countries, or set up all kinds of unreasonable and unequal business practice clauses to restrict the technological development of developing countries, but also often ask for high technology transfer fees. According to statistics, developing countries account for only 1 per cent of the approximately 5 million patents registered in the world. Developed countries such as the United States, Europe and Japan control 80 per cent of the world's technology transfer, with the United States accounting for about 50-65 per cent. Developed countries take advantage of their monopoly in science and technology to demand from developing countries $30-50 billion a year for the purchase of patent rights.
In the field of trade, the western monopoly capital tries its best to manipulate the international market, on the one hand, and on the other hand, it imposes all kinds of discriminatory trade barriers on the developing countries. At present, there are more than 1,000 non-tariff barriers under various names. On the other hand, they have raised the prices of industrial products and lowered the prices of raw materials and primary commodities, thus seriously exploiting the developing countries on an unequal basis; between 1980 and 1989, the prices of primary commodities in the developing countries fell by 33 per cent, resulting in a loss of $106.5 billion in 1989 alone. Since most of the developing countries are still mainly exporting primary products, and their export targets are mainly the western developed countries, this puts them in a position of dependence on the western countries in trade.
In the field of international finance, the developing countries are not only dependent on the western developed countries in the monetary system, but also in a completely powerless position in the capitalist international monetary system; moreover, the western developed countries have also made the developing countries financially dependent on the developed countries by means of governmental loans, loans from the international multilateral institutions and international commercial banks. In addition, the multinational banks of the developed capitalist countries of the West have set up branches in the developing countries in an attempt to manipulate the local social and economic life.
This dependence has inevitably increased the amount of exploitation of the developing countries by the developed countries of the West, making the developing countries pay a heavy price.
Trade deficits and heavy losses. According to the relevant information of the United Nations, in the trade between the two sides, the value of the developing countries' unit exports (in dollars) in 1980 as a base, fell to 83 in 1988, while the developing countries' export trade in 1988 amounted to 679.1 billion U.S. dollars. This alone represents a loss to developing countries of over $115 billion. In terms of imports, using 1980 as a base, the unit value index of developing countries' imports in 1988, however, rose to 106.2, while the value of developing countries' imports in that year amounted to $639.1 billion. In other words, due to the increase in import prices, developing countries had to pay more than $37 billion more for this. Together, the developing countries lost $152 billion.
The external debt is aggravated and the capital is reversed. According to the International Monetary Fund material, since the 1970s, the external debt of developing countries has increased sharply. The accumulated medium- and long-term external debt increased from US$99.2 billion in 1972 to US$104.25 billion in 1988, plus short-term external debt of US$197.2 billion, totaling US$123.97 billion, an 11.5-fold increase over 1972. The high interest rates in the international financial markets since the 1970s had made the interest payments of developing countries even more burdensome; in 1972, those payments had amounted to less than $2.5 billion, but in 1988 they had risen to $83.3 billion, an increase of more than 32 times. Moreover, since 1983, there has been a serious "capital flight" from the developing countries to the Western developed countries. From 1983 to 1987, the middle-income countries reversed the flow of capital by $93 billion, and in 1988, it amounted to as much as $50 billion a year. Latin American countries alone accumulated $151 billion between 1973 and 1985, accounting for more than 40 per cent of the increase in external debt over the same period. There is an anomaly of "drawing blood from the poor".
Foreign profits increased. For example, the average annual profit rate of direct investment in developing countries by United States companies from 1980 to 1985 was about 20%. These profits were partly reinvested locally and partly repatriated to their home countries, and since the 1980s the repatriated portion of profits has long exceeded the amount of new capital exported from these countries.
The consequences of this dependent position in the old international economic order have seriously affected the scale and speed of accumulation in developing countries, thus causing serious setbacks in their efforts to develop their national economies, which will continue to face problems and challenges in many areas in the 1990s, such as the impact of regionalization and blocs; the decline in capital inflows, which makes it difficult to solve the problem of shortage of funds; and the seriousness of the problem of external debt; The scientific and technological gap continues to widen; talent shortage and brain drain; backward industrial structure; terms of trade continue to deteriorate; population growth is much higher than that of the developed countries; the ecological environment continues to be seriously damaged; and the North-South economic gap widens.
In response to the dependent status of developing countries, since the 60s and 70s, the western development economics radicals put forward the center - periphery theory. This theory that: (1) capitalism has developed into a center (developed countries) - periphery (developing countries) of the world system, the peripheral countries to the center of the country has a dependence, they are always in the world capitalist system in a subordinate position; (2) the center of the link - the periphery of the economic mechanism is not the same as the center of the world capitalist system. The economic mechanism linking the center-periphery is unequal exchange and its value transfer. Through unequal exchanges, the center countries have seized a large amount of "surplus" from foreign countries to promote their own development, while the foreign countries are impoverished due to the loss of "surplus"; therefore, both the developed and the underdeveloped are the products of the capitalist system, and they are the cause and effect of each other. (3) The development of the peripheral countries can only be underdevelopment because they provide raw materials and cheap labor to meet the needs of the capitalist world market, and it is impossible for them to industrialize their economies in the same way as the independent capitalist countries. The more they develop, the deeper their dependence on the central state becomes; (4) only by actively resisting the chains and cords that link them (meaning the peripheral states) to the world-wide capitalist system will they be able to achieve their goals. At the heart of this theory is the argument that unequal exchange produces transfers of value as the root cause of underdevelopment and the economic relationship between developed and developing countries. This theory of unequal exchange, based on the labor theory of value, profoundly exposes the exploitation and plundering of developing countries by imperialism, and helps to reveal the causes of underdevelopment in the developing countries and the irrationality and injustice of the old international economic order; to a certain extent, it reflects the sentiments of the third world countries, and, at the same time, it helps to push forward the developing countries' struggle for the establishment of a new international order.
However, this theory fails to see the changes in the historical position of the developing countries in the post-war period and the internal dynamics of their development; it overstates the negative role of external factors in the economic development of the developing countries; and ignores the field of production, concentrating only on the field of exchange, and blaming underdevelopment on unequal exchange. This theory fails to provide a dynamic and discursive analysis of capital accumulation throughout the world. It views the current basic dynamics of North-South economic relations as a complete dependence of the "periphery" on the "center" without interdependence; it is also weak and simplistic in its application. It seldom proposes a set of scenarios for economic development, but tends to be trapped in a simple logic: either it cuts off economic ties with the developed countries and closes itself off from them, or it can only be in a position of dependence. In fact, the center-periphery theory advocates severing ties with developed countries. This is all unrealistic. The essence of this theoretical flaw, therefore, is that it obliterates the distinction between the colonial economy and the national economy after the attainment of independence, and the distinction between bureaucratic capitalism and national capitalism, and makes an erroneous estimation of the basic dynamics of the present North-South economic relations and their nature.
To get rid of their dependence on the developed Western countries, the developing countries must break the old international economic order and establish a new one. To change the pattern of production, consumption and trade in the world economy, to change the unequal and irrational international division of labor, to improve the terms of trade, and to achieve price indexation; for the developed countries to provide official assistance to the developing countries, to increase the transfer of technology, and to ensure that the developing countries enjoy full and permanent sovereignty over their own natural resources, and that they are able to exercise effective control over the development of their resources; that they are able to restrict and supervise the activities of The activities of transnational corporations should be restricted and monitored in accordance with the principle of sovereignty; and the necessary adjustments should be made to the institutions and regulations of the existing international economic institutions in order to change the powerlessness of the developing countries in international affairs and to enable them to participate on an equal footing in the decision-making process in international economic affairs. To that end, North-South dialogue must continue and South-South cooperation must be strengthened. Only in this way can a new international economic order based on the five principles of peace*** be truly established.
The heavy debt burden of developing countries
After World War II, especially since the 1960s, more and more third-world countries have embarked on the path of utilizing foreign capital to develop their national economies, which at one time contributed to the development of the economies of third-world countries, creating such as the Brazilian "economic miracle" and the "Four Little Dragons" of Asia. The "Four Little Dragons" of Asia's economic take-off and so on. However, since 1982, when Mexico announced that it would stop paying the principal and interest on its foreign debt as a precursor, many third world countries have had difficulties in servicing their debts, especially Brazil, Argentina and Mexico, which are the most serious Latin American countries. Despite a series of rescue measures taken by third world countries themselves, creditor governments, international financial organizations and international commercial banks, the external debt crisis of third world countries has not been eradicated. After entering the 1990s, the debt problem is still a heavy burden for the third world countries.
The causes of the debt crisis of developing countries are manifold. There is both a historical background, and the reality of the root cause; both the role of external factors, and internal reasons to contribute.
Historically, it is a direct consequence of colonialism. Long-term plunder and exploitation have caused the deformity of the economic structure of the developing countries and their backward economic development, widening the economic gap between the North and the South. The economic structure of the capitalist world and its economic operations have enabled the Western developed countries to monopolize international production, world trade and the monetary and financial spheres. This has left the developing countries, despite their national independence, in a position of exploitation and plunder.
From the perspective of the external environment, the international environment since the 1970s has been extremely unfavorable to the developing countries: (i) they were hit by two oil price increases in 1973 and 1979. As a result of the rise in oil prices, developing countries that need to import oil import costs soared, the debt burden increased sharply. 1973 non-oil-producing developing countries, the economic account deficit of only 11 billion U.S. dollars, in 1974 the deficit rose to 37.6 billion U.S. dollars, in 1975 reached 46 billion U.S. dollars. The excess expenditures caused by the rise in oil prices alone increased by US$260 billion between 1973 and 1982, or US$335 billion if the interest on borrowings to pay for oil imports is also taken into account; (ii) the world economic recession has led to deteriorating external trading conditions for developing countries. Western developed countries, in order to transfer the great crisis of 1979-1982, adopted different forms of trade protectionist measures while strengthening foreign dumping. According to the World Bank, if Western trade protectionism led to a 10 per cent reduction in Latin American export revenues, the price the region would pay for it would be equivalent to the annual real interest on its entire debt. At the same time, the prices of developing countries' exports, especially the prices of raw materials and primary commodities, which are the main exports of low-income countries, have fallen sharply, resulting in a slowdown in the growth of developing countries' export revenues and a decline in their debt-servicing capacity, and in 1985 the prices of primary commodities had fallen to the level of the Great Depression of the 1930s. Since 1932, the Latin American export commodities trade ratio fell by a cumulative 20%, in 1986, the developing countries' primary product export revenues fell by an average of billions of dollars a year. 1986, the total foreign trade surplus of the 16 heavily indebted countries was reduced by at least half from $29 billion to $13 billion; (iii) the rise in interest rates in international financial markets. Developing countries' borrowing is mainly provided by international commercial banks. after 1979, in order to overcome the increasingly serious inflation, the western developed countries have implemented a tight monetary policy, resulting in higher interest rates in the financial market. For example, interest rates in the United States rose from 6.8 per cent in 1976 to 18.9 per cent in 1981, leading to an increase in the debt burden of debtor countries. In 1982 alone, Brazil paid $7.9 billion more in interest on its debt as a result of higher real interest rates. Since the bulk of the debt of developing countries is in dollars, the sharp rise in the dollar exchange rate resulting from high interest rates has greatly increased the debt burden of developing countries. According to statistics, from the international scope, interest rates on every open a percentage point, the debtor country a year will have to pay more interest rates of 4-5 billion U.S. dollars; (d) the formation of the European unified market, the North American free trade area, the Asia-Pacific economic circle, these grouping of the economy is increasingly demonstrated by the exclusivity of escalating international trade wars make it difficult for developing countries to deal with. At the same time, the flow of funds within the bloc has also reduced investment in developing countries, affecting the economic development of developing countries and making it difficult to repay the huge debt.
From the internal factors, the stagflation of the economic development of developing countries and economic policies and measures inappropriate is also an important cause of the debt crisis: (a) developing countries are generally in a state of stagnation of the economy. According to the statistics of the Economic Commission for Latin America, from 1982 to 1987, the average economic growth rate of the region as a whole was only 1.5%. The inflation rate in Latin America was 47.5 per cent in 1982 and reached 223 per cent in 1988; (ii) the lack of unified management and control of external debt. When the Western banking sector in the 1970s dumped a large number of "petrodollars" and other excess capital, a considerable number of developing countries thought that "a good opportunity" had arrived, and mistakenly borrowed a large number of loans beyond their repayment capacity, especially a large number of international private commercial loans. For example, the external debt of Latin American countries in the 1970s was generally only a few billion dollars, and by the end of the 1980s, it had increased to hundreds of billions of dollars. At the same time, the debtor countries have not according to the debt service, investment, interest payment rate and their respective long and short term, foreign exchange reserves and other relevant factors, the external debt for comprehensive consideration, to develop a suitable national conditions, scientific external debt repayment strategy, which often lose sight of the other, the formation of new debt to pay back the old debt, borrowing new debt to pay back the old interest rate of the situation; (c) improper use of foreign debt funds, the introduction of poor economic efficiency of the project, the Low exchange rate. With foreign debt to support the project is often a large-scale and unrealistic long-term construction projects, some borrowing projects have not formed any production capacity. For example, Brazil launched three nuclear power plants in the 1970s at a cost of 3.5 billion dollars, so far failed to generate electricity. As a result, the average repayment period of the total medium- and long-term external debt of debtor countries is smaller than the recovery period of the projects for which these funds were used. Another part of the external debt has been used for the consumption of luxury goods, such as in Chile, where imports of televisions increased by 7,942 per cent and imports of cosmetics and perfumes by 6,500 per cent between 1970 and 1978. In other countries, external debt managers were corrupt and diverted funds from external debt to private real estate or foreign portfolio investments. In this way, the external debt has not brought about an increase in the productive capacity of the country as a whole, and at a time of sudden changes in the world economic situation, it is difficult to cope with and unable to repay the debt as scheduled; (d) a large amount of capital outflow from developing countries. The main reason for this is the loss of confidence in their own economies and currencies. For debtor countries, the more debt is accumulated, the more serious the debt crisis becomes, and the more capital outflows from the country. The greater the outflow of capital from the country, the greater the scarcity of domestic funds, and therefore the greater the need to borrow foreign debt. This creates a vicious borrowing cycle. According to the World Bank report, by the end of 1983, Argentina, Mexico and Venezuela, the cumulative total of capital outflows were equivalent to 61%, 44% and 77% of the total external debt. It is estimated that in the past few years, Latin American countries, the outflow of funds is still equivalent to half of the external debt.
Based on the above analysis, in essence, the debt crisis of the developing countries is caused by the post-war developed capitalist countries' prolonged pursuit of economic colonialist policies. The debt crisis of the developing countries has lasted for 10 years since 1982. The external debt situation has the following characteristics: (1) the total debt has expanded sharply, and the debt-servicing capacity has continued to decline. 1982, the total debt was 839 billion U.S. dollars, in 1989, the total debt soared to 1,290 billion U.S. dollars, the average annual growth rate of as high as 6.7 per cent. 1990 exceeded 1,341 billion U.S. dollars, an increase of 2 per cent compared with the previous year. According to the International Monetary Fund estimates, 1992 will increase to 1388 billion U.S. dollars, will be about 4% more than the previous year. At the same time, a number of countries have emerged one after another liquidity crisis. Since 1986, Peru, Brazil, C?te d'Ivoire, Zambia, Bolivia, Costa Rica, Dominica, Nicaragua and other countries have announced that they would stop paying interest on their foreign debts as they fall due; (2) the debt crisis involves a wide range of resource-exporting countries are more heavily burdened. 1970, the debt amount of more than 1 billion U.S. dollars of the country was only 14 countries, in 1985 it increased to 63, and the debt amount of more than 10 billion U.S. dollars of the country was more than 1 billion dollars. The number of countries with debts of more than US$10 billion was virtually non-existent in 1970, but increased from 16 in 1985 to 27 in 1987. By the end of 1989, the number of countries with debts of more than $100 billion amounted to 31 in sub-Saharan Africa alone. The debt problem involves almost all developing countries. (3) Significant changes in the structure of debt and deteriorating loan conditions. This is mainly manifested in two aspects: first, the focus of debt and claims has shifted from official debt and claims to private debt and claims respectively; second, short-term debt has increased. As a result of the deterioration of the economic situation and political instability in debtor countries, banks in creditor countries have become more and more cautious in granting long-term loans, and their conditions have become more and more stringent, resulting in a decrease in long-term loans and an increase in short-term loans. (4) The international debt pattern is characterized by the concentration of debtors and creditors. As a debtor country, Latin America and Africa are the "hardest hit". Latin American countries owed external debt accounted for 34% of the total external debt of developing countries in 1989, amounting to 434 billion dollars, African countries in the same year, the total external debt also amounted to 250 billion dollars, accounting for about 20% of the total external debt. Since 1982, more than half of the external debt of the developing countries has been concentrated in the 17 countries with the heaviest debt burden, and their total debt is still growing, with the ratio of debt repayments to export revenues still standing at 41.6 per cent in 1988. Their total debt has always amounted to more than half of their GNP for that year. Both indicators exceed the current internationally recognized 25 per cent threshold. Of the 17 heavily indebted countries, Latin America alone accounts for 12. Brazil, at the top of the list of 17 heavily indebted countries, had a debt of $121.3 billion at the end of 1987. The degree of concentration on the creditor side is also equally high. According to the World Bank, in 1985, among the total external debt of the 17 major debtor countries, the share of the United States commercial banks' claims amounted to 24.5 per cent. Of the commercial banks that granted loans to the 10 debtor countries of Central and South America, those of the United States accounted for 40 per cent, Japan for 16 per cent and the United Kingdom for 15 per cent. Thus, in the case of developed countries, it is the commercial banks of the major developed countries that are involved in the debt problem. This high concentration of debt and claims increases the instability of the international financial system. As long as one or two debtor countries refuse to pay or are unable to pay, the United States banking system will be the first to be hit, and then the entire international monetary and financial system will undergo turbulence, which may lead to a global financial crisis.
The third world debt crisis, which has lasted for several years, has not only affected the economic development of developing countries themselves, but also seriously affected the world economy and even political and social development.
The heavy debt burden has made the economic deterioration of developing countries very serious, and become a serious shackle on economic development. (1) the debt burden seriously hindered the development of the third world countries. 70's, developing countries to borrow foreign debt is for the development of production, but in the 80's, could have been used for the development of production of borrowing, had to be used more for the repayment of capital and interest. From 1982 onwards, there was a strange phenomenon of capital reversal, in which the developing countries not only failed to obtain funds from the developed countries, but also reversed the flow of their own funds to the developed countries; the loss of funds in Latin America during the period from 1982 to 1987 amounted to $145.6 billion, and in 1988, the Latin American region's debt servicing amounted to $26 billion, whereas the amount of new loans received amounted to only $6 billion, which was a reversal of more than three times that of the previous year. This situation has led to many debtor countries, domestic capital poverty, production paralysis, financial market turbulence, currency devaluation, inflation, unemployment, political unrest and a series of disasters occur frequently, resulting in the economic growth rate of developing countries fell significantly. (2) The debt crisis has seriously affected the foreign trade of developing countries. The development of foreign trade, the introduction of advanced technology and equipment, and the technological transformation of the backward sectors of the national economy of the country are an important way for developing countries to develop their economies, and also a major source of foreign debt repayment. However, because of the increasingly heavy debt burden, many debtor countries have had to use the foreign exchange originally intended for the import of production equipment and technology to pay off the principal and interest on their debts, which, coupled with the compression of investment in production, has led to a steady decline in the production capacity and foreign exchange earning capacity of developing countries. At the same time, the main exports of primary products to generate foreign exchange in the international market price is too low, so that the developing countries export trade in difficulty; (3) the debt crisis seriously affects the economic adjustment of the third world countries. since the 80's, many developing countries in order to change the backwardness of the economic structure, have set up their own economic development strategy, such as the introduction of advanced technology and equipment, the development of some new industries and new projects. projects, and so on. However, because most of the funds are used for debt servicing, some of these programs are forced to be canceled or postponed indefinitely. Therefore, the debt crisis not only greatly reduces the current economic growth of developing countries, but also seriously affects their future economic take-off; (4) The debt crisis deepens the dependence of developing countries on developed capitalist countries and weakens their autonomy. Heavy debts have made some developing countries unable to come out of the crisis by their own strength. Without loans from developed countries, they can neither repay the principal and interest of their old debts nor develop their production, nor even maintain their survival. This has not only weakened the ability of developing countries to counteract the transfer of crises from developed countries, but has also made it very easy for developing countries to fall back into the control and exploitation of developed countries. The Western developed countries, led by the United States, make use of the International Monetary Fund (IMF) and the World Bank, which are under the control of the United States, to take advantage of the fact that some developing countries are in dire need of funds in times of economic difficulties and to put forward various preconditions in the form of a "letter of intent" to the recipient countries, thus influencing the economic policies of the recipient countries. As the Argentine economist Aldo Ferrer has pointed out: "External debt poses a serious threat to sovereignty and to the right of our peoples to self-determination."
Faced with the serious debt crisis, developing countries have taken a series of measures since the mid-1980s to adjust their economic structure and development strategies, such as reducing the speed of development and borrowing; expanding exports and compressing imports to increase debt-servicing capacity with foreign trade exports; implementing a tight fiscal and foreign exchange control system for external debt; and so on. The above measures enabled the debtor countries to reduce their fiscal deficits to a certain extent in the late 1980s and to improve their debt-servicing capacity. However, these measures also had serious negative effects, leading to the decline of productive investment, the abnormal development of foreign trade and the decline of the domestic main living standards.
The debt crisis of the developing countries has also had a serious impact on the developed countries in the West, which not only threatens the stability of the international monetary and financial system, but also affects the economic development of the developed countries, so that the Western countries have lost a large part of the commodity market. Therefore, in order to prevent the debt crisis of developing countries from hitting the international financial market and to safeguard their economic and strategic interests in the third world, the Western developed countries and some international financial institutions have successively adopted and implemented a series of so-called "rescue of developing countries' debt crisis" policies. The "Miyazawa Plan", "Mitterrand Plan" and "Baker Plan" were successively put forward, but all of them ended up in failure. "Brady Plan", the centerpiece of which was: to encourage commercial banks to cancel part of the debt of debtor countries; to require international financial institutions to continue to provide new loans to debtor countries to promote the economic development of debtor countries; and to improve the ability to repay the debt. Compared with previous programs, the "Brady Plan" puts the focus of foreign debt resolution on debt principal and interest relief, rather than on borrowing new debt to repay old debt. This plan changed the United States in the past insisted on forcing the debt of the rigid position, means that the United States of America's debt policy has made a major turn, the grim reality forced the United States Government began to recognize that debt relief is to solve the debt problem must be the way. Although this plan is likely to lead to private banks to cut loans, and to what extent it can be realized is still questionable, but than in the past a step forward to alleviate the debt crisis has provided a breakthrough. But it should also be seen that the nature of US economic colonialism has not changed.
At present, the measures to reduce the debt of developing countries mainly revolve around the following aspects: (1) debt capitalization. Foreign creditor banks will sell their own books in the form of debt at a discount, bond buyers buy the debt, through the local bank discounting converted into the debtor country's currency and then invested. The advantage to the creditor is that it finds a way to utilize its loans at face value. To the debtor's advantage is: the smooth settlement of part of the debt, reduce the debt burden. According to statistics, in the first half of 1988, developing countries capitalized debt amounted to 8.8 billion U.S. dollars. However, debt capitalization has two negative effects that cannot be ignored: one is to aggravate inflation in debtor countries; the other is to strengthen the control of foreign investors over the debtor country's economy. (2) Cash buyback, where a country buys back its debt in cash at a certain discount. The most famous of these is Bolivia's debt buyback program. In March 1988, Bolivia repurchased 40% of its commercial bank debt ($335 million) at an average discount rate of 89% (i.e., 11% of the face value), and in early 1989 made a similar arrangement. At present, due to the serious shortage of foreign exchange reserves in developing countries, this approach is unlikely to be widely applied. (3) Reduction of debt service. Unconditionally cancel the debt funds owed by developing countries and reduce interest rates. This approach is now increasingly being used by creditor countries.
As the third world countries themselves, in order to get rid of the heavy burden of external debt, they must seize the favorable opportunity to take concrete measures to reverse the passive situation, and should try to do the following: (1) continue to adjust and reform the structure of the domestic economy, vigorously pursue the strategy of export promotion, and overcome the debt crisis through the expansion of exports, which in turn will be used for the economic development of the export surplus; seek diversification of the sources of foreign capital, and maintain economic development and debt-servicing capacity in a positive relationship; from the system and policy efforts to create conditions to improve the efficiency of the use of foreign capital, and to promote the increase of domestic savings; (2) the development of South-South cooperation. Developing countries will join together to strengthen their negotiating power with developed countries in the fields of international trade and international finance, improve the terms of international trade, and improve the conditions for borrowing and debt repayment; (3) carry out North-South dialogues and actively promote the establishment of a new international economic order. In this process, form developing countries' own multinational corporations, form their own regional financial institutions, and promote the resolution of the debt problem through South-South cooperation.
Entering the 1990s, the debt of developing countries has been alleviated, such as in 1991, the external debt of Latin American countries decreased by 2.1% compared with the previous year. However, it should be noted that it is unrealistic and impossible to solve the long-standing global debt problem completely in the short term. The debt problem would remain a heavy burden on the developing countries for a long time to come. However, as long as the developing countries are coordinated, from the domestic and international efforts at the same time, to get rid of the debt distress is still full of hope.