‘Dire’ Situation
“The situation is quite dire,” Mariscal said in an interview, adding that he expects oil prices to “creep up” later this year.
The country has borrowed more than $45 billion from China over the past decade, using the funding for everything from farming to infrastructure and telecommunications projects.
With Venezuela verging on humanitarian catastrophe, the nation needs tens of billions of dollars from the IMF, former planning minister Ricardo Hausmann said in a phone interview.
“In the coming months there will be larger Venezuelan consensus that the crisis is unbearable and they need the support of the international community, and the IMF will lead that effort,” said Hausmann, now director of Harvard University’s Center for International Development.
Brazil is the one economy whose default would be considered a “systemic” event that could spill over into other countries, Talvi said.
The IMF projects Brazil’s gross domestic product will shrink 3.5 percent in 2015, after contracting 3.8 percent last year. The real has plunged 35 percent in the past year, while inflation has risen to almost 11 percent. The country is also mired in political gridlock, with President Dilma Rousseff facing impeachment over accusations she used accounting tricks to minimize the budget deficit.
“Brazil’s trapped on this road with no exit and, eventually, something is going to give,” Talvi said. “You need to solve the credibility problem to be able to borrow at reasonable rates while you do the fiscal repair work and the structural reforms, and I don’t think it’s possible to do that in the middle of a political crisis without the support of the international community through the IMF.”
Ecuador should ask the IMF to help restructure its debt and regain access to global credit markets, former Vice President Alberto Dahik said in an interview. However, President Rafael Correa, a self-described socialist revolutionary, is unlikely to ask for help for ideological reasons, he said.
The country has relied on loans from China to help prop up public spending since the government defaulted on about $3.2 billion of its foreign debts in 2008 and 2009. China delayed promised loans in 2015, forcing the Andean nation to look further afield to finance its budget.
“If you need blood, you’ve got to go to the blood bank,” Dahik said.