Final answer:
Latin American countries, after facing high trade deficits and unproductive investments, managed their debts primarily through negotiations and restructuring, which sometimes resulted in partial debt forgiveness. This approach was essential in managing the unsustainable debt burden of the 1980s.
Step-by-step explanation:
Latin American countries such as Mexico and Brazil endured economic hardships due to large trade deficits and excessive borrowing from international lenders during the 1970s. This borrowing spree was a result of foreign capital being invested without yielding the necessary productivity increases. When the economic conditions worsened in the 1980s, these nations struggled to repay their debts. Addressing the original question, the primary method by which Latin American debts were dealt with was through individual Latin American countries through renegotiation. This often involved restructuring the debts and sometimes even led to certain amounts being written off as bad debt by lending institutions.
Debt renegotiation was seen as a way to manage the burden of debts that had become unsustainable due to large interest payments and a lack of economic growth to offset them. The result was a complex process balancing the abilities of countries to pay with the interests of international financial institutions and foreign creditors.