You’re probably aware Argentina has defaulted on its sovereign debt nine times since its independence in 1816.

You probably also know defaults are historically widespread across Latin America.  At least five former Spanish colonies have defaulted on their sovereign debts nine or more times each:  Argentina of course, and also Venezuela, Ecuador, Costa Rica and Uruguay.

What you may not know is the colonial backstory.  Argentina’s former colonial overlord, Spain, has defaulted on its sovereign debt at least 22 times that I could find:  1557, 1575, 1596, 1607, 1627, 1647, 1652, 1662, and 1666, plus another six times in the 1700s, and another seven times in the 1800s. (source, source)

Are Latin American defaults a cultural artifact of Spanish occupation?  Well, let’s compare to England.  Turns out that six of the ten countries that have never defaulted are England and former English colonies:  Canada, Malaysia, Mauritius, New Zealand, Singapore.  (The United States is an edge case, having paid interest late a couple of times, and having reneged on gold exchangeability of US bonds in the 1930s.)

When it comes to paying debts, there appears to have been a bug in the Spanish cultural program that was passed to its colonies.  What might that be?

It may be related to Spain’s essentially extractive view of colonization:  find gold and silver, ship it back to Madrid, and spend it on extending empire and Catholicism.  When that spending was not enough, Spain borrowed, and used precious metal extraction to pay the interest.  When that still was not enough, Spain defaulted and started over again.  And again.

Meanwhile, France and England developed industries to sell many of the things Spain was buying.  Spain’s extractive approach brought more long-run benefit to Spain’s rivals than to Spain itself.

Thus Spain was a victim of the Dutch Disease long before it afflicted the Dutch.  Instead of oil & gas, it was gold & silver that hollowed out the Spanish economy.  And Spain’s “bad choices” may to have led to the languishing not only of Spain, but also of certain of its former colonies, by transmitting to them a culture of spending rather than investment.