Many excellent books have been written on the debt crisis of the 1980s (notable examples include Cline (Reference Cline1993), Devlin (Reference Devlin1990), Husain and Diwan (Reference Husain and Diwan1990), and the relevant sections of Reference BoughtonBoughton (2001)).

Sgard’s book makes an outstanding contribution to this field for several reasons. First, it provides a comprehensive analysis of the crisis through a modern lens, incorporating contemporary understandings of economics, international law, and the politics of sovereign debt. It also traces how crisis management strategies have evolved over time. Second, the book’s transdisciplinary approach seamlessly combines issues of sovereignty, economics, finance, and international law. Finally, Sgard enriches the literature by organizing existing oral histories and introducing new testimonies from key actors involved in the crisis.

The book is divided into eight chapters, each delving into a different aspect of the crisis. It begins with an analysis of the International Monetary Fund’s (IMF) conditional lending practices, tracing their roots back to the 1940s and early successes in Bolivia and Paraguay in the 1950s. It then explores how this experience informed the IMF’s strategies in the 1970s, particularly in restructuring sovereign debts and engaging commercial banks. The Mexican crisis of 1982 serves as a focal point for examining the establishment of precedents that shaped debt restructurings until the late 1980s. Subsequent chapters analyze broader frameworks for restructuring, such as the Paris-Club agreements, technical aspects like creditor accounting, and the internal and external dynamics of the IMF during this time. Macroeconomic challenges, including hyperinflation and the “debt overhang” debate, are addressed in later chapters, culminating in an analysis of the Brady Plan (1989–1992), its success, and its interaction with capital markets. The book concludes with interviews from key figures, including Paul Volcker, Jacques de Larosière, Guillermo Ortiz, Ángel Gurría, William Rhodes, and Charles Dallara.

One of the most engaging sections of the book is exactly this series of interviews at the end. These testimonies bring a human and personal dimension to the complex dynamics of the debt crisis. They offer a fascinating array of perspectives from key figures who were directly involved in managing the crisis. The contrasting viewpoints are particularly instructive.

I cut my teeth in international economics by working on Latin American debt during the late 1990s and early 2000s, often in collaboration with Latin American scholars and policymakers. At the time, my impression was that the pre-Brady Plan period, leading up to 1989, represented an unmitigated disaster. The strategies seemed primarily designed to protect the U.S. banking system from a potential systemic collapse, with little regard for the immense economic and social costs imposed on debtor countries. However, the interviews with Paul Volcker, Jacques de Larosière, William Rhodes, and Charles Dallara offer a strikingly different perspective. They frame the crisis management efforts as necessary measures to stabilize a fragile global financial system, providing a compelling, albeit contrasting, narrative to my earlier understanding. While these reflections could be perceived as self-serving, given the role of these actors as principal architects of the strategies deployed during the crisis, they also offer valuable insights into the rationale behind critical decisions and the pressures they faced at the time. Volcker was notably unimpressed with the Brady Plan.

Guillermo Ortiz, on the other hand, provides a more critical perspective, highlighting the immense costs borne by Latin American nations as a result of the IMF’s and U.S.’s early strategies. Interestingly, Ángel Gurría, despite representing Mexico, aligns more closely with the IMF and U.S. perspective. This diversity of opinions enriches the book and provides readers with a more nuanced understanding of the competing interests and perspectives that shaped the crisis.

The interviews also shed light on the critical role of individual leadership in navigating the crisis. Paul Volcker, as chairman of the Federal Reserve, and Jacques de Larosière, as head of the IMF, emerge as towering figures in these narratives. Dallara recalls a moment in an elevator with the towering former Fed chair—standing over two meters tall—when Volcker remarked sharply, “I hope you’re happy, Dallara. You’ve just destroyed the U.S. banking system.” This striking anecdote underscores Volcker’s skepticism and the high stakes surrounding the plan’s implementation.

Dallara’s description of de Larosière underscores the reverence and influence he commanded during this period. This reminds me of a conversation I once had with an old IMF hand who remarked that while countries often focus on the size of their quotas, their real influence in institutions like the IMF or the World Bank often depends on the quality of their representatives. A skilled and respected executive director, he argued, can have far greater impact than a marginal increase in voting power. This observation is vividly illustrated in Dallara’s reflections on Alexandre Kafka, Brazil’s executive director at the IMF. Kafka’s negotiating skills, his deep understanding of the institution, and his ability to command respect from both the IMF staff and the board made him a critical asset for Brazil during the crisis. His role underscores how much of diplomacy and international finance relies on the expertise and reputation of key individuals. Individuals can sometimes be more important than formal institutional arrangements like voting quotas.

Overall, this section of the book adds tremendous value by showcasing the human side of the crisis and the complex interplay of perspectives, personalities, and leadership styles. It underscores the importance of understanding the crisis not just through economic models and data but also through the lens of the individuals who shaped its outcomes. These interviews make the book an essential resource for anyone seeking a deeper appreciation of the debt crisis’s intricacies and the challenges of managing sovereign debt on a global scale.

One surprising omission in the book is the lack of any discussion about Colombia, which was the only large Latin American country that did not “default” during the 1980s (Caselli et al. Reference Caselli, Faralli, Manasse and Panizza2021). I use “default” in quotation marks because, technically, no country officially defaulted before the Brady Plan. As Dallara notes, “as we moved into 1988 one could see default as a possibility on the horizon” (p. 290). However, had rating agencies assessed these countries at the time, they would likely have classified most of Latin America as being in default.Footnote ¹ While there was no formal acknowledgment of default until the Brady exchanges, the academic literature widely agrees that most Latin American countries effectively defaulted multiple times throughout the 1980s (Asonuma and Trebesch Reference Asonuma and Trebesch2016; Borensztein and Panizza Reference Borensztein and Panizza2009). Colombia, however, is never classified as a defaulter, even though it rescheduled its debts four times during this period. What sets Colombia apart is that these reschedulings were done under far more favorable conditions for creditors compared to the rest of Latin America, and Colombia did not have a formal IMF program (however, it had a “shadow” program).

The question remains: Why was Colombia treated differently? Caselli et al. (Reference Caselli, Faralli, Manasse and Panizza2021) suggest that Colombia’s exceptional treatment was largely due to strong political support from the United States. This unique aspect of Colombia’s experience would have been an intriguing topic to explore in the book. A discussion with policymakers on the reasons behind Colombia’s distinctive approach and the implications of its preferential treatment could have provided valuable insights into the geopolitical dynamics of the crisis.

This omission notwithstanding, Sgard’s book is a must-read for anyone interested in the intersection of economics, international law, and the political complexities of sovereign debt crises. Its transdisciplinary approach, combined with detailed analyses and firsthand accounts from key players, provides a comprehensive and nuanced understanding of the 1980s debt crisis. By revisiting this pivotal period through a modern lens, the book not only deepens our understanding of past challenges but also offers valuable lessons for managing future crises. For scholars, policymakers, and students of economic history, this book is an indispensable resource.