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Resources, trade and debt: the case of Mexico

Chichilnisky, Graciela and Heal, Geoffrey and McLeod, Darryl (1983): Resources, trade and debt: the case of Mexico. Published in: Global Analysis and Projections Division No. No. 1984-5 (September 1983): pp. 10-34.

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Abstract

The paper studies a two-region economy , with two sectors and three factors of production : oil, capital and labor . The South exports oil in exchange for industrial goods from the North . There is a net capital inflow to the South . This equals the difference between its export revenues and import costs, and represents the South's indebtedness . This overseas borrowing finances the development of the oil sector : increased borrowing leads to higher oil supplies, to new levels of consumption and a new distribution of income in the South, as well as to new levels of exports from the North . The paper studies the macro impacts of changes in the value of the debt on both the borrowing and the lending regions . The results are illustrated by simulations with data for the U .S .A . and Mexico .

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