Even by Latin American standards, Ecuador’s third default in 14 years is noteworthy. More remarkable still is the cunning of President Rafael Correa, who made debt investors an offer they could not refuse by repudiating two global bonds, themselves restructurings of earlier defaults. Ecuador is solvent, so it is with extraordinary cheek that the government is repurchasing the bonds at 35 cents on the dollar through a reverse auction and has already bought a chunk at lower prices.

Engineering a security’s price collapse and then buying it cheaply would normally land a fund manager in prison. But Mr Correa is smelling like a rose. Exploiting the crisis, he picked the perfect moment to exploit funds struggling to meet redemptions. Had he attempted yet another debt exchange rather than offering investors cash, or a clumsy ultimatum like Argentina’s, which is still struggling to restructure defaulted bonds, he would have failed. Ecuador’s debts are small in a global context, but there are fears of larger copycats. If others play the same game, sovereign lending could grind to a halt. Fortunately, large borrowers are more dependent on international capital markets than Ecuador.