Latin America's New Reality

Ecuador's New Government Talks Default on Debt

Before Argentina's default, a powerful creditors' cartel headed by the IMF had a credible threat of punishing a defaulting country by depriving it of credit from most sources, thereby increasing the cost of a default. That is no longer the case. Furthermore, Ecuador can likely borrow whatever it needs from Venezuela, which has $36 billion in reserves, and has lent billions of dollars to Argentina, and also provided loans and aid to Bolivia and other countries.

All this is part of the new reality in Latin America, and means that the left/populist governments throughout the region can, if they are so inclined, pursue a much greater variety of economic and development policy options - and deliver on their promises without much fear of retribution from international financial markets or institutions, including the United States government.