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Paper short abstract

This paper examines why crisis-ridden countries avoid default in a multipolar financial system. Using Argentina and Venezuela, it shows how China’s state-led finance reshapes debt negotiations and policy space through a new form of composed structural power.

Paper long abstract

Despite recurrent debt crises and deep socioeconomic distress, sovereign defaults have become increasingly rare in the contemporary global economy. This paper examines why crisis-ridden developing countries continue to service external debt even when traditional enforcement mechanisms associated with the structural power of finance weaken. It focuses on two cases—Venezuela (2013–2018) and Argentina (2019–2023)—both of which experienced severe crises yet persistently averted default.

Drawing on comparative qualitative analysis and process tracing, the paper shows that the three mechanisms commonly identified in the literature—creditor coordination, the influence of domestic financial elites, and the unifying role of lenders of last resort—broke down in both cases. Nevertheless, repayment continued. To explain this puzzle, the paper advances the concept of composed structural power, arguing that China’s rise as a state-led global creditor has reshaped how financial power operates in a multipolar system.

Chinese finance introduces state-permeated and relatively patient capital through instruments such as currency swaps, collateralized lending, and emergency liquidity support. These mechanisms allow governments to manage liquidity crises and sustain debt servicing while postponing restructuring and preserving asymmetric creditor–debtor relations. As a result, policy space is temporarily expanded but structurally constrained over the medium term.

The paper concludes that China’s financial expansion has hybridized the global debt regime rather than transformed it, reinforcing debt dependence through new state-to-state channels. These findings contribute to debates on development finance, sovereign debt governance, and the equity implications of an evolving multipolar financial order.