Is Venezuela headed for a default?

Falling oil prices have side-swiped Venezuela's government finances, spurring concerns of a sovereign default, but it isn't clear whether contagion effects will emerge. "Both the government's willingness and ability to service its foreign currency debt is in serious question," Capital Economics said in a note last week, citing declining oil prices. "Given that the government has nothing in the way of savings from the oil price boom of the past decade, the loss of oil revenues will wipe out whatever foreign currency that the government has," it said. "With the bolivar collapsing in the black market, capital flight is only likely to increase putting even more pressure on the supply of hard currency." More…