Calling foreign creditors "monsters," Ecuadorian President Rafael Correa declared a default on his country's foreign bonds and called for a restructuring of Ecuador's foreign debt.
REUTERS - President Rafael Correa declared a default on
Correa, a U.S.-trained economist and ally of
"I gave the order not to pay the interest and to go into default," Correa said. "We know very well who we are up against -- real monsters."
"If we have to face international litigation due to this, we will," he added at a news conference in the OPEC nation's largest city of
The default is unlikely to have a knock-on effect in other Latin American countries' debt policies even if some, such as
Correa, who had often threatened to default, will offer bond-holders a tough restructuring deal. Last month, Ricardo Patino, a top debt adviser to Correa, said investors should expect a reduction of more than 60 percent in the nominal value of the global paper in any negotiations.
But Patino, who was on a trip to the
"LIFE BEFORE DEBT"
Although the default decision comes against the backdrop of a global financial crisis,
Correa, whose political slogan is "life before debt," is popular among Ecuadoreans for his stance against investors.
He has already forced foreign companies to change contract terms in the oil and mining industries and ejected a major Brazilian building company in a dispute over a dam construction as he seeks to increase state income.
But the default is his harshest move in almost two years in office and is in keeping with a shift toward confrontation in the region between leftist governments and foreign investors.
The default will likely lead to drawn-out investor lawsuits against
That bleak economic outlook looms just as Correa will struggle with falling income because oil prices have plunged in recent months more than $100 a barrel.
"This is perhaps the visible implementation of President Correa's long-espoused thesis that countries should default preemptively," Alberto Ramos, a senior economist at Goldman Sachs wrote in a research note from
Citing unnamed sources, an Ecuadorean newspaper reported this week the government had bought back about $680 million in bonds as the debt's prices fell due to Correa's threats. If true, Correa will have fewer bond-holders to battle in court.
Date created : 2008-12-13