August 1982: Latin American Debt Crisis The DXY hit 120 — its highest level in decades. Paul Volcker had jacked US rates to 20% to break inflation. That crushed the dollar cost of servicing debt for countries like Mexico, Brazil, and Argentina. Mexico defaulted on August 12, 1982, triggering a cascade across Latin America. Over $300 billion in sovereign debt went into arrears. The region spent the next decade — the "Lost Decade" — in austerity and restructuring. The dollar's strength was the mechanism that broke them.