, Columnist
Venezuela Has Good Reasons to Avoid Default
The government faces big risks and costs if it stiffs bondholders.
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With Venezuela's economy veering into depression and Venezuelans scrambling to find basic goods, the government's decision to keep servicing the country’s $68bn in external bonds has been called everything from “crazy” to “a crime against humanity.” Putting bondholders above Venezuelans, these critics argue, is just morally wrong.
But such charged rhetoric is no substitute for a sober analysis of Venezuela's debt predicament. Seen in that light, the wisdom of defaulting is less clear cut. Moreover, focusing the economic policy discussion on whether to pay the country’s external debt creates a dangerous distraction that could derail necessary and urgent reforms.