On May 26, 2017, Harvard economist Ricardo Hausmann published an Op Ed titled “Hunger Bonds”, urging investors to avoid Venezuelan sovereign bonds on the grounds that the country was prioritizing payments on the bonds over remedying a humanitarian crisis. Contemporaneously, news emerged regarding a suspicious looking bond issue by Venezuela’s oil company that was purchased largely by Goldman Sachs. That bond got tagged with the label “Hunger Bond”, and suffered a price hit. Using both quantitative data and interviews with investors, (...) we examine the causes of the Hunger Bond penalty, its impact on the prices of other outstanding Venezuelan bonds, and how long it was sustained. The primary determinants of the Hunger Bond penalty appear to have been a combination of negative press attention and crowd-sourced disapproval. For instance, we show that a large number of Google searches for “Hunger Bonds” are associated with a 200 basis point increase in the spread of the bond purchased by Goldman Sachs. (shrink)

When should binding debt contracts not be repaid? This article argues that whenever the repayment of sovereign debt threatens the human rights of the citizenry, this provides a weighty normative reason to prioritize the fulfilment of the latter over the former. Since there are specific, non-coincidental reasons to fear that a high indebtedness of states may result in the undermining of the socio-economic and the collective human rights of a state’s citizenry, the more specific thesis defended in this article is (...) the following: whenever debt repayment undermines the socio-economic and collective human rights of the state´s citizenry, states have a normatively weighty reason to prioritize the fulfilment of the citizen’s human rights over meeting their contractual debt payment obligations vis-à-vis their creditors. (shrink)