Ecuador is in talks with the International Monetary Fund for a credit line of as much as $1 billion after the nation was hit by an earthquake, flooding and a landslide in recent weeks, Bloomberg News reported. The government has its financing needs covered for the year, but is seeking additional support to fund disaster relief after the series of natural calamities, Finance Minister Pablo Arosemena said Wednesday, in an interview in Washington D.C. “We don’t need the money right this second,” Arosemena said.
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Ecuador
Ecuador has fully financed its budget for next year and is not looking for a new credit agreement with the International Monetary Fund (IMF), the country's economy minister said on Friday, adding that the government will maintain close ties with the fund, Reuters reported. The IMF this week concluded the latest review of its $6.5 billion financing agreement with Ecuador, opening the way for a final disbursement of $700 million to the South American nation.
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Ecuador plans to pay off a debt it owes to French oil company Perenco at the end of this year and is open to a dialogue to determine how the payment should be made, the country's economy minister said on Wednesday, Reuters reported. Ecuador is obliged to pay compensation to Perenco after the World Bank's International Centre for Investment Disputes (ICSID) ruled the country had unlawfully ended a production-sharing agreement with Perenco and owed it $391 million including interest.
Some holders of Ecuador's sovereign dollar-denominated bonds maturing in 2030, 2035 and 2040 have received interest payments which had been due on the securities on July 31, Reuters reported. A Luxembourg bailiff had ordered banks to freeze assets held by Ecuador at accounts in the country as a result of a dispute over a $391 million settlement award that Anglo-French oil company Perenco says remains unpaid, a document seen by Reuters show.
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Ecuador expects to pull together a trade deal with China at the end of this year and will begin formal debt re-negotiations with the Asian country, Ecuadorean President Guillermo Lasso said on Saturday, after a Beijing visit with his counterpart Xi Jinping, Reuters reported. China became Ecuador's top lender over the last decade, with millions of dollars in long-term credit tied to the handover of crude oil, large investments in hydro-electric and mining projects and other loans. "In China we had a productive meeting with the President Xi Jinping," Lasso posted on Twitter.
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Ecuador has reached a new staff-level agreement with the IMF that could result in $1.5 billion in new disbursements this year following promises by President Guillermo Lasso's government to cut spending, the finance minister said on Wednesday, Reuters reported. The South American nation last year struck a $6.5 billion deal with the multilateral lender to help revive an economy that for years struggled under low oil prices and was further weakened by a brutal coronavirus outbreak.
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Across the world, government bondholders have seen losses pile up this year as a pickup in inflation and economic growth puts central banks under pressure to raise interest rates, Bloomberg News reported. That makes even more remarkable the windfalls seen in Ecuador, a junk-rated South American nation that was mired in recession even before the pandemic and was forced to restructure $17.4 billion of debt last year -- a step rating companies considered a default.
Ecuador bonds fell for a second day as Sunday’s presidential election threatened to throw the Latin American nation back into economic turmoil, Bloomberg News reported. With less than 1% of votes left to count, Ecuador is heading for an April runoff between leftist Andres Arauz, with almost a third of the vote, and the indigenous party’s Yaku Perez, with 20.10%. To investors’ surprise, market friendly Guillermo Lasso is third with 19.49%, according to the National Electoral Council’s latest count.
Credit Suisse Group AG, ING Groep NV and BNP Paribas SA will stop providing trade financing for oil exports from the Ecuadorian Amazon, after pressure from climate activists, Bloomberg News reported. The three banks were collectively responsible for $5.5 billion of such financing in the past 11 years, according to research by Amazon Watch and Stand.earth. The two activist groups called out the companies for double standards, saying they promoted corporate sustainability while also financing the Amazon oil trade that contributes to climate change.
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Sovereign default risks are on course to rise further in 2021, with Iraq, Sri Lanka, Angola and Gabon at high probability of default, say Goldman Sachs analysts, Reuters reported. Five sovereign debt defaults or distressed debt exchanges - in which investors swap their debt for new bonds, often with longer maturities and a reduced value - have already happened in 2020 in the aftermath of the COVID-19 crisis, the most in around two decades.