South America

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.

Brazilian bankruptcy filings are set to soar as the country’s corporates are squeezed by a global downturn and gridlocked capital and bank markets, say lawyers specializing in the matter. Ronald Herscovici, a partner at Souza Cescon in Sao Paulo, said the new bankruptcy law in Brazil makes it more attractive for companies to file because it encourages the preservation of the concern, rather than pushing towards asset liquidation, as with the former law, LatinFinance reported.

President Hugo Chavez ordered the expropriation of a rice-processing plant in Venezuela owned by American food giant Cargill Inc. on Wednesday because the company allegedly was not distributing rice at prices imposed by the government, the Associated Press reported. The socialist leader also threatened to nationalize Venezuela's largest food producer, Empresas Polar, amid rising tension between his government and privately owned food producers that authorities accuse of sidestepping price controls aimed at stemming high inflation.

Venezuela took control of a local bank owned by Allen Stanford, who faces U.S. fraud charges, the finance minister said on Thursday, as the impact of the American case spread through Latin America, Reuters reported. Finance Minister Ali Rodriguez said the government would seek to quickly sell the bank. In recent days, depositors had worried that the trouble at Stanford International Bank would hurt Stanford Bank Venezuela and had withdrawn cash from the small local bank even though the companies' assets are separate, industry officials and bank customers said.

Apex Silver Mines Ltd, which runs silver mining operations in Latin America, has sought bankruptcy protection from creditors with a New York court, with plans to sell its stake in a Bolivian mining operation, Reuters reported. The company filed a Chapter 11 petition with the U.S. bankruptcy court in Manhattan late Monday, and says it will receive $27.5 million plus other consideration for its stake in the San Cristbal Mine in Bolivia from Sumitomo Corp.

Oilexco Inc., a North Sea producer of oil and gas, lost more than half its market value in London trading today after saying its U.K. subsidiary was likely to file for insolvency administration as early as next week, Bloomberg reported. Calgary-based Oilexco North Sea Ltd. has been informed by Royal Bank of Scotland Group Plc that lenders aren’t prepared to provide further financing, Oilexco said today in a statement. The unit “does not have any other source of funding,” it said, adding that the parent company “remains solvent.” Oilexco hired Morgan Stanley and Merrill Lynch & Co.

Twice in the last three decades, Mexico has demonstrated that one country’s profligacy and mismanagement can spell economic catastrophe beyond its borders. In 1982, the country defaulted on its foreign debt and set off a Latin American debt crisis that led to a decade of anemic growth across the region. In 1994, the peso collapsed and halted capital flows to emerging markets around the world, until the Clinton administration arranged a $50 billion Mexican bailout.

The risk of default by Brazil’s biggest companies increased as the global credit crisis spread to the country, O Estado de Sao Paulo newspaper reported. The credit rating of Brazilian companies with more than 800 million reais ($337 million) in revenue jumped from 4.5 to 5.3, Estado reported, citing Serasa Experian, the biggest credit- rating firm in Latin America. A bigger number indicates a higher probability of default, according to the newspaper. Serasa downgraded 34 of the 276 companies it rated, Estado said. Individual credit ratings by Serasa are confidential.

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.