Ecuador

Ecuador’s inability to borrow in international markets after its 2008 default is drawing the nation closer to China as the world’s largest commodities consumer grants loans in exchange for access to oil and metals, Bloomberg reported. Home to untapped copper reserves similar to those of Chile and Peru, the world’s top producers, Ecuador has signed loans for $7.3 billion from China since 2009, or about one-third of the Andean country’s annual budget, according to data compiled by Bloomberg based on government announcements.

Ecuador has offered to buy back up to $3.2 billion in defaulted bonds at a large discount in a move that reinforces President Rafael Correa popular tough stance on debt ahead of a presidential election on Sunday, Reuters reported. Finance Minister Elsa Viteri said on Monday Ecuador was offering 30 cents per dollar in a process that would involve a "modified Dutch auction." She did not spell out the terms of the modified Dutch auction. In a standard Dutch auction, the lot for sale is offered at an initial price, which if there are no takers, is then reduced until there is a bid.

Ecuadorean President Rafael Correa may unveil an offer today to holders of $3.2 billion in defaulted bonds, a restructuring he says could include a discount of about 70 cents on the dollar. Falling income from oil has made it unlikely the proposal will include the outright buyback offer that Correa previously mentioned as a possibility, said Ramiro Crespo, head of Analytica Securities in Quito. Instead, he may offer to swap the defaulted debt for new bonds that carry a lower interest rate and longer maturity, he added.

Ecuador says it will formally default on a second set of bonds later this week, the International Herald Tribune reported. Finance Minister Maria Elsa Viteri says the government will default Sunday on $2.7 billion in bonds due in 2030 because it refuses to pay $135 million in interest by the end of a monthlong grace period. Viteri said in a communique Thursday that Ecuador plans to make an official proposal to debt holders this month for an "integral solution" to the defaulted bonds, which account for 32 percent of its foreign debt.

Fresh from a $30.6 million default, Ecuador's government has issued $700 million in new bonds to help finance next year's budget, local media reported Thursday. The Ecuadorean Social Security Institute bought all the new bonds, in line with regulations that require it to invest half its funds in government debt, according to the Guayaquil newspapers El Universo and Expreso.

Ecuador’s default on $3.9 billion of international bonds means it’s only a matter of time before the country drops the U.S. dollar as its currency, Goldman Sachs Group has said, Bloomberg reported. Ecuador’s use of the dollar gives President Rafael Correa no outlet for providing credit to the economy as access to foreign financing dries up and revenue from sales of oil, the nation’s biggest export, tumbles.

The biggest losers from Ecuador's debt default announced Friday are not foreign bond holders, the Latin Business Chronicle reported. Rather they are Ecuadorian companies, which now will have a virtually impossible time getting international credit--just as all markets are suffering from a credit crunch. "Ecuadorian exporters of shrimp, banana and flowers will likely find it difficult to secure trade finance," UK-based risk consultancy Exclusive Analysis said.

Ecuador may saddle investors with the biggest losses in a government bond restructuring since at least World War II after President Rafael Correa fulfilled a two-year pledge to default on debt he calls “illegitimate,” Bloomberg reported. Investors expect to recover less than the 30 cents that Argentina paid in a 2005 settlement that was the harshest since the war, according to Arturo Porzecanski, an international finance professor at American University in Washington. Correa said in a Dec.

Ecuador sees falling oil prices as a determining factor in its decision on whether to service foreign debt that the leftist government deems "illegal," Minister of Politics Ricardo Patino told Reuters on Monday. Patino, one of President Rafael Correa's closet allies, said a restructuring of the country's Global bonds was less likely now as the government plans to decide on whether it will keep servicing or default on the debt this week.

Ecuador’s government is considering various ways of repudiating its debt and will ask for loans from friendly governments like Iran should it lose access to credit markets, the country’s finance minister Maria Elsa Viteri said. Ecuador has threatened to default on $3.9 billion in bonds because it says a government-commissioned audit found evidence of criminal violations in connection with its issuance, Bloomberg reported. The government skipped a $30.6 million bond payment on Nov. 15, invoking a 30-day grace period.