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| Hugo Chávez: gambling on the oil price |
For bond investors trying to figure out which is the real Latin America, this year has brought some confusing signals. Ecuador's government is showing an ability to mismanage its economy that would put many populist Latin American regimes of the 1970s to shame. Last month the central bank doubled its interest rates to 160% in an attempt to shore up the currency. The country has defaulted on its Eurobonds, some of its Brady bonds and will probably also have to renege on its $3 billion of domestic obligations, further impoverishing its own population. If all this wasn't bad enough, an unnamed terrorist group last month blew up the country's most important oil pipeline and the volcano overlooking the capital threatened to erupt at any moment. Nothing any Ecuadoran government can do now will prevent years of economic stagnation and isolation from international capital.
Fortunately for the rest of Latin America, Ecuador is small. Venezuela, however, is a bigger fish. Its populist president, Hugo Chávez, seems determined to set it on a course that the rest of Latin America abandoned long ago.