Africa falling off the map

Doug Henwood dhenwood at
Sun Jun 30 11:05:06 MDT 1996

At 5:31 PM 6/29/96, rakesh bhandari wrote [responding to me]:

>>South Korea has grown stupendously with very
>>little FDI;
>Though South Korea has not received much in the form of FDI, it has not
>been shy to the capital markets.  At times, it has endured "Latin American"
>levels of indebtedness, right?

Korea borrowed heavily, yes, but it never reached Mexican levels of
indebtedness. In 1987, Mexican debt was 82% of GNP, and debt service was
40% of exports. That year, Korea's debt was 30% of GNP, and debt service
32% of exports. But Korea's debt service figure was high because it was
retiring principal; interest payments that year were just 6% of exports,
compared to 27% for Mexico. Figures for the pre-crisis of 1980 are also
heavily in Korea's favor.

>Though of course the indebteness has been
>relieved by considerable export income.  If the suggestion is that
>development has been possible outside and against the imperialist system,
>then there must be some consideration of the fact  that development there
>was jumpstarted by US military orders.

Absolutely. U.S. military spending in Korea was crucial in at least two
senses - providing balance of payments support as early as the 1950s, and
providing Korean contractors with important construction and manufacturing
experience, which they then took advantage of in foreign markets (e.g.,
giant constuction contracts in the Middle East during the 1970s oil boom).

>>Mexico has been one of the prime targets of FDI,
>According to Jorge Casteneda in Foreign Affairs (a couple years back), most
>capital flowing into Mexico has not gone into productive investment but
>merely the purchase of assets.

More portfolio capital entered Mexico during the great boom than FDI, yes,
but from 1990-95, Mexico was the #2 target country (after China) for FDI,
among the "developing" countries. By the way, some 70-80% of FDI in the
first half of the 1990s in the "Third World" was accounte for by just a
dozen countries.

Source of all these numbers is the World Bank's World Debt Talbes, 1996.



Doug Henwood
Left Business Observer
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