Jérôme Sgard's book revisits the Latin American debt crisis of the 1980s, providing the first thorough update on this major episode in the history of sovereign debt and international financial crises since William Cline's International Debt Reexamined (Columbia University Press, 1995). The work is organised into two parts: the first part presents the author's own analysis of the crisis, while the second part features interviews with some of the main protagonists. These include leading crisis managers such as IMF Managing Director Jacques de Larosière and Citibank's William Rhodes, as well as policymakers from creditor and debtor countries, including Fed Chairman Paul Volcker and Charles Dallara from the US Treasury, along with Mexican negotiators Ángel Gurría and Guillermo Ortiz. The interviews are their last available testimonies, offering reflections with 40 years of hindsight on the dynamics of this global financial crisis, which these key figures successfully managed to defuse amid significant distress and uncertainty.

Two aspects distinguish this book as noteworthy. First, while addressing the various dimensions of the crisis and the actors involved in it, the primary lens of analysis and the most compelling insights come from the perspective of the IMF. By going back to the early days following the Bretton Woods Agreements, Sgard digs into the institution's archival records to reconstruct how the different elements that later played a prominent role in managing the 1980s debt crisis were developed. From the creation of conditional lending (Chapter 1) and the no-lending-into-arrears policy (Chapter 2) to the establishment of information databases and a burden-sharing approach with creditor banks (Chapters 3 and 4, respectively), the book details the historical development and convergence of all the ingredients that defined the IMF's role as the debt crisis manager during the 1980s. This role, though not part of its original mandate, remains a key function of the Fund today. The narrative depicts the Fund's ongoing quest to find its place in the international financial scene, innovating and challenging its statutes as it adapted to new contexts and evolving relationships with member states. It also highlights the IMF as a keen and astute observer of sovereign debt market developments in the 1970s and of the threats these posed to the global financial system.

The second fresh insight concerns legal considerations. The book delves into the distinctions between private and sovereign capital markets, which are central to the literature on debt crises, with a particular focus on how these issues played out during this period. Amid significant changes in the institutional legal framework on sovereignty issues in the United States and the United Kingdom, Sgard presents the IMF as an expedient mediator, helping to resolve disputes between debtors and creditors, thereby preventing unilateral defaults and court litigations until new legal procedures for dealing with sovereign debt issues were established (Chapter 5). Legal systems provide essential protection and certainty to debt markets, but the stability of the international banking system during the debt crisis of the 1980s was secured on the fringes of the regulatory frameworks. The book highlights how informality and forbearance were crucial in navigating the complexities of debt challenges, from the early stages and the Baker Plan (Chapter 6) through leadership changes in 1987 (Chapter 7) to the implementation of the Brady Plan that ultimately resolved the crisis in 1989 (Chapter 8).

The story the book portrays is one filled with tension and despair, vividly capturing the complexities and challenges of coordinating thousands of diverse actors worldwide. It inspects the conflicts of interest among banks, the tough negotiations with recalcitrant banks, and the tensions between creditor banks and their governments. The narrative highlights the IMF's forceful interventions, the resistance from debtors, and the legal and contractual ambiguities, all unfolding in the absence of a clear roadmap or adequately equipped actors to manage such a massive crisis. The attempt to reconcile this chaotic scene with the ultimate success in avoiding a large-scale global financial collapse runs throughout the book. It meticulously identifies the threats and various elements that contributed to this favourable outcome, offering a profound analysis of its resolution. While sharing common themes with other writings on the topic, Sgard provides a fresh and renewed perspective on how these complex challenges were overcome.

Despite the valuable insights the book offers, informed readers, particularly economic historians, may still wonder about the key reason why a global financial crash never occurred, especially considering other historical waves of sovereign debt crises and cases where even small sparks triggered systemic explosions. Arguably, no other major international debt crisis has been depicted in the literature with such emphasis on seemingly insurmountable problems and challenges, yet it stands out as one of the few where no repudiations or global collapses happened. Remarkably, national and international financial stability was preserved in the developed world without the use of traditional lender of last-resort policies or significant liquidity injections into the banking system, even with prevailing uncertainty and high exposure to developing countries’ debt. Furthermore, the Fed and the Bank of England, among other central banks, showed no hesitation in pushing interest rates up to levels as high as 20 per cent to fight inflation, a move that centrally contributed to the crisis. This contrasts sharply with more recent situations, where the decisions of central banks to tighten monetary policy and increase interest rates to curb inflation appears to have been significantly affected by fears of the potential effects of increased borrowing costs on the stability of the corporate sector and the financial system.

Although beyond its scope and purpose, the book does provide some hints at possible structural factors that may help explain these issues. When comparing the monetary policy and regulatory framework of the international credit boom of the 1970s with the post-war financial repression regime, Sgard highlights the existence of segmented credit markets (Eric Monnet, Controlling Credit: Central Banking and the Planned Economy in Postwar France, 1948–1973, Cambridge University Press, 2018). He states that ‘an undoubted benefit of such a regime is that the risks of large systemic crises and contagion across market segments was limited by construction’ (p. 57). One wonders, then, if, despite increasing deregulation and globalisation after the end of Bretton Woods, the national and international financial architectures and capital markets were still operating within relatively compartmentalised frameworks, thus limiting contagion and systemic risk in ways not seen during other international financial crises, such as those of the 1990s and 1930s. Furthermore, could the dominance of bank credit as the primary lending instrument of the 1980s crisis, rather than bonds as in the 1990s and 1930s, have been a determining factor? These are important aspects for understanding the dynamics and forces underlying the crisis and financial markets more broadly, and they warrant further study.