sharon sanders
Editor-in-Chief & President
As oil prices drop, an oil exporter defaults on foreign debt - making this a 100% performance. Foreign $$ will continue to seek safe havens.
Ecuador Defaults on Bonds, Seeks Restructuring
By Stephan Kueffner
Dec. 12 (Bloomberg) -- Ecuador won?t make a $30.6 million bond interest payment due next week, putting the South American country in default for a second time in a decade, President Rafael Correa said.
?The country is in default,? Correa told reporters in his office in Guayaquil. Correa, calling the debt ?illegal? and ?illegitimate,? said the government will present a restructuring proposal to bondholders in coming days. ?We want creditors to recoup part of their money.?
The country?s bonds plunged to under 25 cents on the dollar.
By defaulting, Correa, 45, fulfills a threat he made during his 2006 presidential campaign and reiterated throughout the first two years of his term. His decision comes as a deepening global economic slump throttles demand for oil, the country?s biggest export. Ecuador, which defaulted in 1999, owes about $10 billion to bondholders, multilateral lenders and other countries.
?Ecuador is moving further into isolation,? said Vicente Albornoz, head of the Cordes research institute in Quito. ?The hardliners in the government won.?
Correa, who holds a doctorate in economics from the University of Illinois at Urbana-Champaign, has said he will not sacrifice spending on health and education to pay the debt. Ecuador?s foreign obligations are equal to 21 percent of its $44 billion gross domestic product. Argentina?s debt, by comparison, was equivalent to 150 percent of its GDP when it defaulted in 2001, according to Goldman Sachs Group Inc.
Oil, which has plunged 70 percent since July amid the global financial crisis, accounts for about 60 percent of Ecuador?s exports. Finance Minister Maria Elsa Viteri said on Nov. 18 the country?s fiscal accounts remain ?strong and healthy.? Ecuador had $5.65 billion in cash reserves as of Dec. 5, according to the central bank.
?This is just political,? said Santiago Caviedes, managing partner at investment firm Humboldt Management in Quito. ?Payments amount to only 0.8 percent of GDP.?
To contact the reporter on this story: Stephan Kueffner in Quito at skueffner@bloomberg.net
http://www.bloomberg.com/apps/news?pid=20601086&sid=a5PyWzGVCR7E&refer=news
Ecuador Defaults on Bonds, Seeks Restructuring
By Stephan Kueffner
Dec. 12 (Bloomberg) -- Ecuador won?t make a $30.6 million bond interest payment due next week, putting the South American country in default for a second time in a decade, President Rafael Correa said.
?The country is in default,? Correa told reporters in his office in Guayaquil. Correa, calling the debt ?illegal? and ?illegitimate,? said the government will present a restructuring proposal to bondholders in coming days. ?We want creditors to recoup part of their money.?
The country?s bonds plunged to under 25 cents on the dollar.
By defaulting, Correa, 45, fulfills a threat he made during his 2006 presidential campaign and reiterated throughout the first two years of his term. His decision comes as a deepening global economic slump throttles demand for oil, the country?s biggest export. Ecuador, which defaulted in 1999, owes about $10 billion to bondholders, multilateral lenders and other countries.
?Ecuador is moving further into isolation,? said Vicente Albornoz, head of the Cordes research institute in Quito. ?The hardliners in the government won.?
Correa, who holds a doctorate in economics from the University of Illinois at Urbana-Champaign, has said he will not sacrifice spending on health and education to pay the debt. Ecuador?s foreign obligations are equal to 21 percent of its $44 billion gross domestic product. Argentina?s debt, by comparison, was equivalent to 150 percent of its GDP when it defaulted in 2001, according to Goldman Sachs Group Inc.
Oil, which has plunged 70 percent since July amid the global financial crisis, accounts for about 60 percent of Ecuador?s exports. Finance Minister Maria Elsa Viteri said on Nov. 18 the country?s fiscal accounts remain ?strong and healthy.? Ecuador had $5.65 billion in cash reserves as of Dec. 5, according to the central bank.
?This is just political,? said Santiago Caviedes, managing partner at investment firm Humboldt Management in Quito. ?Payments amount to only 0.8 percent of GDP.?
To contact the reporter on this story: Stephan Kueffner in Quito at skueffner@bloomberg.net
http://www.bloomberg.com/apps/news?pid=20601086&sid=a5PyWzGVCR7E&refer=news