In the 1970s, Japan briefly showed enthusiasm over Brazilian prospects. A vast territory richly endowed with raw materials and with a sizable Japanese-Brazilian minority in the population, Brazil appeared to Japanese business to offer great opportunities for trade and investment. However, none of those expectations have been realized, and Japanese financial institutions became caught up in the international debt problems of Brazil and other Latin American countries.
In 1990 Japan received US$9.8 billion of imports from Latin America as a whole and exported US$10.2 billion to the region, for a surplus of US$429 million. Although the absolute value of both exports and imports had grown over time, Latin America had declined in importance as a Japanese trading partner. The share of Japan's total imports coming from this region dropped from 7.3 percent in 1970 to 4.1 percent in 1980, remaining at 4.2 percent in 1990. Japan's exports to Latin America also declined, from 6.9 percent in 1980 to 3.6 percent in 1990.
Despite this relative decline in trade, Japan's direct investment in the region continued to grow quickly, reaching US$31.6 billion in 1988, or 16.9 percent of Japan's total foreign direct investment. This share was only slightly below that of 1975 (18.1 percent) and was almost equal to the share in Asian countries. However, over US$11 billion of this investment was in Panama--mainly for Panamanian-flag shipping, which does not represent true investment in the country. The Bahamas also attracted US$1.9 billion in investment, mainly from Japanese financial institutions but also in arrangements to secure favorable tax treatment rather than real investments. Brazil absorbed US$5 billion in Japanese direct investment, Mexico absorbed US$1.6 billion, and other Latin American countries absorbed amounts below US$1 billion in the late 1980s.
Latin American countries lie at the heart of the Third World debt problems that plagued international financial relations in the 1980s. Japanese financial institutions became involved as lenders to these nations, although they were far less exposed than United States banks. Because of this financial involvement, the Japanese government was actively involved in international discussions of how to resolve the crisis. In 1987 Minister of Finance Miyazawa Kiichi put forth a proposal on resolving the debt issue. Although that initiative did not go through, the Brady Plan that emerged in 1989 contained some elements of the Miyazawa Plan. The Japanese government supported the Brady Plan by pledging US$10 billion in cofinancing with the World Bank and the IMF.
Data as of January 1994