Ecuador Default May Hit ‘True Monsters’ Harder Than Argentina

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. 13 radio address that he wants to force a “big discount” on creditors, a group he referred to a day earlier as “true monsters who won’t hesitate to crush the country.” David Bessey, who manages more than $8 billion of emerging-market debt for Prudential Financial Inc. in Newark, New Jersey, said it may take Ecuador the “better part of a decade” to regain access to international capital markets, he said. “It’s a rare thing to not pay when you can.” The default is Ecuador’s second in a decade and seventh in its 178-year history. In 1999, Ecuador halted payments on $6.5 billion of bonds that had been restructured just five years earlier. Read more. In a related story, bond traders in Latin America are braced for a stormy week upon fears that Venezuela, Bolivia, and Argentina may be tempted to follow suit, setting off the sort of stampede seen across the region in the early 1930s, The Daily Telegraph reported. Read more.