Report: Ecuador Sells $700 Million Debt After Default

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. The institute, known as the IESS, bought $350 million of six-year bonds with an annual interest rate of 6.5 percent, and $350 million more in seven-year bonds at a 6.75 percent interest rate, the newspapers said. Ecuador faces a rising budget deficit, falling oil income and limited access to international credit markets following President Rafael Correa's decision Dec. 12 to forego a $30.6 million interest payment due on $510 million in debt. The move soured international investors, many of whom now see the IESS as the government's captive lender of last resort. A public audit last month recommended that Ecuador default on bonds due in 2012, 2015 and 2030, whose contracts auditors called "illegitimate, corrupt and illegal." Those bonds together represent about 40 percent of Ecuador's $10 billion in foreign debt. Read more.