Final answer:
Debt problems in Latin America during the 1970s and 1980s varied depending on how each country invested borrowed funds. Those failing to invest in productive assets had trouble repaying debts, unlike those that invested wisely like South Korea.
Step-by-step explanation:
The debt crises in Latin America, including those of Costa Rica and Guatemala during the 1970s and 1980s, were heavily influenced by how countries utilized the borrowed funds. Large economies, like Mexico and Brazil, ran large trade deficits and heavily borrowed from abroad but failed to invest in ways that would enhance productivity, hence they encountered severe difficulties repaying these debts when economic conditions changed in the 1980s.
Countries that did not invest in productive assets faced large interest payments without economic growth to support debt repayment. An example of better management of borrowed funds is South Korea, which, despite its trade deficits, invested significantly in physical plant and equipment, resulting in rapid economic growth and ability to repay its debts from the mid-1980s to the mid-1990s.
In the context of Costa Rica and Guatemala, their debt problems varied based on how each country managed trade deficits, foreign investment, and the productivity gains from capital inflows.