Disaster By Default -- IBD EditorialLatin America: Ecuador lived up to its reputation as a banana republic Monday by defaulting on sovereign debt it easily could have paid. It looks like the real plan may be to bankrupt its own private sector.
On its face, Ecuador's default on $3.8 billion in bonds looks like rank stupidity. Sovereign defaults, after all, are rare, and almost always the result of a nation running out of cash. Not Ecuador. Monday's default is its second in eight years, and its seventh in 178 years as a nation.
But unlike other defaults, Monday's stiffing of investors is based on unwillingness, not inability, to pay. Flush from high oil earnings, the tiny Andean state has $5.6 billion in reserves and public debt at only 33% of GDP. It could easily pay if it wanted to.
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