Ecuador Auditor Urges Debt Default

The official overseeing an audit of Ecuador's foreign debt said his committee found evidence of abuses and irregularities tied to almost all of the country's bonds and will recommend a default on $10.3 billion in national debt, the Associated Press reported yesterday. Auditors have uncovered "indications of illegality" in the debt contracts and negotiation processes, said Hugo Arias, coordinator of the Special Commission for Foreign Debt Audit, in an interview published Monday by the Ecuadorean newspaper El Universo. Ecuador has delayed $30.6 million in interest payments that was due Saturday on 2012 bonds, using a 30-day grace period to assess the results of the audit scheduled for release on Thursday. President Rafael Correa suggested that previous governments mishandled debt negotiations and abused privileged information for personal financial gain, ordering the audit in 2007. Finance ministers allegedly forced down the price of Ecuador's bonds by threatening to default, then bought them on the cheap before refinancing the nation's debt and restoring the value of their holdings. Arias, the auditor, did not give names, but called the debt "a giant and unpayable monster" and said a default on the bonds--held by foreign governments, private investors and others--would be "a historic achievement for the country." Read more.