Either you watch out your language or you keep it private

IHT republish an Oxford Analytica daily brief called "Debt legitimacy comes under scrutiny".

Here some of the more relevant passage:


"Some Latin American governments are increasingly questioning the 'legitimacy' of their public debt. Questioning the need to service and repay debt incurred by previous governments, despite having ability to pay, is an innovative strategy that aims to elevate the needs of domestic citizens by making additional resources available to them, at least in the short term. However, it runs contrary to the rules and expectations underpinning the global financial architecture.
(...)
"If Correa's gamble appears to pay off initially, by seeming likely to succeed in substantially reducing his county's debt burden without a significant economic deterioration, this could embolden other governments in the region and elsewhere to make similar moves".
(...)
However, if it soon becomes apparent that the cost of Ecuador's default is too high, in terms of a virtual elimination of (already reduced) access to international credit markets -- including companies' access to trade finance -- and an ensuing worsening of fiscal problems (probably including an inability to meet accelerated debt obligations even if it wished to), then this would be likely to discourage other countries from taking similarly belligerent approaches.
(...)
"There is certainly a significant degree of truth to the argument that debts incurred by previous authoritarian and/or corrupt governments in developing countries have not ultimately had the domestic social benefits expected. Some non-governmental organizations, such as the Jubilee Debt Campaign, have long sought to bring to wider debate issues surrounding the 'legitimacy' of developing countries' debt burdens and appear generally sympathetic to the idea of strategic default if the social burden of continuing debt servicing and repayment is very onerous.
In a worst-case scenario, the actions being taken by Quito and being contemplated by some other regional governments could embolden countries all over the world to engage in strategic defaults on their debts. Though unlikely, this could lead to the unraveling of parts of the global sovereign debt system, with dire long-term consequences.
More likely is that Ecuador and any other countries pursuing strategic defaults will suffer severe economic collapses in the short-to-medium term, deterring other countries from doing so.