Conventional wisdom seems to claim that Low Developing Countries (LDC) debt rescheduling problems are reflections of the failure of borrowers to invest their loans in appropriate productive activities. A primary aim of this paper is to evaluate the operational relevance of an approach which focuses on the use to which externally borrowed funds are put. In section two a general long-run theory of creditworthiness that suggests present concerns over the degree to which countries invest externally borrowed money are misplaced is presented. The paper asserts that other structural parameters of the macro economy, particularly the marginal propensity to save and the average capital/output ratio are much more important. Section three shows that several stylized facts which have characterized recent historical defaults cases can be readily explained within this theoretical framework. Section four applies the theory to three countries--Brazil, Korea, and Peru, which were chosen because of their diverse international credit experiences. The paper finds that defaults are associated specific kinds of structural change in the economy and that such changes are normally leading indicators of defaults. Such findings suggest that the methodology may be developed into a short-run predictive model of defaults.