While the rest of Latin America is experiencing bumper capital inflows, Venezuela is gripped by a dollar drought. With President Chavez seeking re-election in December 2012, there is a growing risk that the government will default on its foreign debt. Some form of restructuring already appears to be priced into the market, so the threat of contagion should be limited. But while the market expects there to be some kind hiccup, we think that there is a chance that debt repayments will be halted altogether.
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