Since the announcement from there finance secretary, Jesus Silva Herzog that Mexico could not make payment on its $90 billion debt, it caused a lot of ruckus and chaos. A year after Mexico's announcement more than forty other countries ran out of money and announced that they could no longer pay their interest or principle on the huge debts that they owed to private banks and government lending agencies in first world countries. In 1983 it was estimated that Latin America, Africa, and Eastern Europe as a whole owed $810 billion. It is an increase from the 1970, which they only owed $64 billion.
             In light of all these countries not able to pay back their debts. It created a debt crisis. This debt crisis threatened first and third world countries in the same ways. If these countries are unable to pay their debts then the major banks could fail. Which could create a widespread of bankruptcy, financial chaos, and possibly global economic depression. The borrowing countries in Latin America, Africa, and Eastern Europe declared bankruptcy, they could no longer get the money they need to pay for their essential food and ail imports. They could not be able to develop the industry they need to provide jobs for growing populations.
             The cause of the debt crisis is the rising of interest rates and the falling commodity prices. The head of the Federal Reserve in the United States raised the interest rates in 1979 to fight inflation in the United States. There were two important consequences in the rising of interest rates. From the late 1970s to 1982 Mexico's interest rate tripled from $2.3 billion to $6.1 billion. The payments more than doubled; it doubled from 14.1 billion to $36.1 billion. Those high interests made it very difficult for the borrowers to pay back their debts.
             The second problem was that the U.S. interest rates were attracting money from around the world. Countries such as Western Europe and Japan had high ...