English: Cloze Test for Upcoming Exams – Set 129


Directions: In the passage given below there are 10 blanks. Every blank has four alternative words given in options (A),(B),(C), and (D). You have to tell which word is APPROPRIATE according to the context. If all are appropriate then mark your answer as “E”.

VENEZUELA is an unusual country. It is home to the world’s largest reserves of oil and its highest rate of inflation. It is known for its unusual number of beauty queens and its frightening rate of murders. Its bitterest ____1____, America, is also its biggest customer, buying a third of its exports.

In defaulting on its sovereign bonds last month (it failed to pay interest on two dollar-denominated bonds by the end of a grace period on November 13th), Venezuela is also increasingly unusual. The number of governments in default to private creditors fell last year to its lowest level since 1977, according to the Bank of Canada’s database. Of the 131 sovereigns tracked by S&P Global, a rating agency, Mozambique is the only other country in default, having ____2____ payments on its Eurobond (and failed to make good on guaranteed loans to two state-owned enterprises). Walter Wriston, a former chairman of Citibank, earned ridicule for once declaring that “countries don’t go bust”. But they don’t much anymore.

This dearth of distress is surprising, given the turmoil emerging economies have ____3____ in recent years. The collapse in commodity prices that undid Venezuela was accompanied by a sharp reversal of capital flows to emerging economies that began in 2011 and gathered pace during the “taper tantrum” of 2013. There have been 14 such capital “busts” in the past 200 years, according to Carmen Reinhart of Harvard University, Vincent Reinhart of Standish Mellon Asset Management and Christoph Trebesch of the Kiel Institute for the World Economy. The most recent ____4____was the second-biggest of the lot. But it led to less distress than usual. If past patterns had held, such a severe setback would have resulted in 15-20 more defaults than actually____5____, the three scholars calculate.

What explains these “missing” defaults? Some may be hidden. China, for example, may have rescheduled or ____6____ some of its sizeable loans to emerging economies without ever declaring them bad. Indeed, China’s willingness to roll over its loans to Venezuela delayed, even if it did not ultimately prevent, the Bolivarian republic’s default on some of its other debts.

Distress also now manifests itself in other ways, points out Gabriel Sterne of Oxford Economics, a consultancy. The governments of emerging economies increasingly ____7____ in their own currencies. These are no longer tightly pegged to the dollar, as many were in the 1980s and 1990s, or to gold, as in the 19th century. Of 54 emerging markets Mr Sterne has examined, only 11 have foreign-currency bonds worth more than 20% of their GDP (see chart). So defaulting on hard-currency debt is neither as necessary nor as helpful as it was. Even if a sovereign were to forswear a big ____8____ of its dollar obligations, imposing a steep loss on creditors, it would only save a large percentage of a small amount.

The costs of default, on the other hand, are somewhat fixed. Default is, in legal terms, a ____9_____ event. Reneging on debt worth 10% of GDP may be just as damaging to a country’s reputation as reneging on debt worth twice as much. And the costs are not just financial. “You have to negotiate with the creditor committees. You’re going to get all the hedgies (hedge funds) potentially ganging up on you. And that’s a pain in the backside,” notes Mr Sterne. In a growing number of emerging markets, including past offenders like Brazil, Mexico and Peru, default on foreign-currency debt is no longer imaginable, he says.

What about the local-currency securities that have grown in importance? Since governments have the power to print the money they owe on these bonds, default is never technically necessary. Currency depreciation and inflation offer a more ____10____ way to erode creditors’ claims: less discrete, more discreet.

  1. adversary
    All are Correct
    Option B


  2. discovered
    All are Correct
    Option C


  3. faltered
    All are Correct
    Option D


  4. exonerate
    All are Correct
    Option C


  5. transpired
    All are Correct
    Option A


  6. furnished
    All are Correct
    Option E


  7. allow
    All are Correct
    Option B


  8. speck
    All are Correct
    Option C


  9. aggregate
    All are Correct
    Option C


  10. furtive
    All are Correct
    Option C
    surreptitious :- kept secret, especially because it would not be approved of.


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