It is the same old story:  third world nation takes out loans to get an infrastructure project done, the project fails or the country cannot pay back the loan, their economic collapse comes next, then the nation settles with those whom they owe money, there is debt forgiveness and we start over.  Reminds me of that line from the movie Godfather 3, “Finance is a gun and politics is knowing when to pull the trigger”.

The New York Times reports that Ecuador has built a brand new dam for hydroelectric power and it simply does not work:  cracks in the structure, silt plugging up the flow of water, and built right beside an active volcano.  Gee, I wonder why it does not work?  Its basically the same old players – corrupt government officials, China, US, IMF, and Brazil’s Odebrecht engineering company.  The NY Times article is entitled It Doesn’t Matter if Ecuador Can Afford This Dam. China Still Gets Paid.

In the 1900’s, we could look down our noses at these countries and think, “that’s what they get for corruption”.  But one thing is different, particularly in Latin America, now a days they send a lot of people to jail, as you will see in the article.  Furthermore, today, most of the debt is held by the most advanced nations.  As the Figure shows below, the highest levels of debt today are held by the first world nations – that goes for debt to GDP ratio too.

World Debt
Source:  World Economic Forum

The top economic nations in the world have their problems with corruption and looting the treasury.  Take the recent subprime loan crisis.  The only problem is that in the US, we did not send the guilty to jail.  The New York times again reported in 2014 that only one top executive was prosecuted for those crimes – Why Only One Top Banker Went to Jail for the Financial Crisis.

It has been argued internationally that finance has been used by the first world to keep the third world nations down.  If that is true, the first world had better be careful, because now they are at the top of the list for countries with large debt.  Reminds me of that saying in Psalms, “Let them be caught in their own traps”.

 

 

 

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