Ecuador defaults, says to fight "monster" creditors

[420inTN]

Source: Yahoo! News!

By Maria Eugenia Tello Maria Eugenia Tello – 46 mins ago

GUAYAQUIL, Ecuador (Reuters) – President Rafael Correa declared a default on Ecuador's foreign sovereign bonds on Friday, vowing to fight "monster" debt-holders in court in one of most aggressive moves against investors in the region for years.

Ecuador's dollar-denominated debt prices plunged on news of its second default in a decade and the first in Latin America since Argentina in 2002, although the decision was not expected to lead to similar moves around the region.

Correa, a U.S.-trained economist and ally of Venezuela's anti-U.S. President Hugo Chavez, refused to make a $31 million interest payment due on Monday on 2012 global bonds, saying the debt was contracted illegally by a previous administration.

"I gave the order not to pay the interest and to go into default," Correa said. "We know very well who we are up against -- real monsters."

Read more: http://news.yahoo.com/s/nm/20081212/wl_nm/us_ecuador_debt_4

[Idealism]

1. Ecuador is being hurt by oil prices and lack of foreign reserves

Ecuador exported about 400 thousand barrels of oil per day (2004 data) so the recent $100 per barrel drop in oil prices would be about $40 million per day less revenue. Other oil exporters will have problems too, although many oil exporters have significant foreign reserves.

From Calculated Risk

[420inTN]

2. They had the money to make the payment

from the article linked in the OP:

Although the decision comes against the backdrop of a global financial crisis, Ecuador received record income from oil exports for much of the year and has enough funds to make the payment. Correa's policy is driven by ideological rejection of such debt deals, according to economists.

[Idealism]

3. I wasn't implying he didn't have the resources to make the interest payment

But when you take into consideration a $40 million loss per day due to low oil prices, he is saving the money for a rainy day. Its the same thing US banks are doing who got the bailout, not lending, because they are worrying about the future.

[420inTN]

4. No, I understood...

I just wanted to provide that quote snippet for the clarification of other readers who might not have read the entire article from the OP.

on a side note, this is post #666. >:-)

[Idealism]

5. Nice!

[JDPriestly]

6. So much for "free" trade. So long. Goodbye. Don't forget to shut the door on your way out.

[IndianaGreen]

7. BBC: Ecuador defaults on foreign debt

Here is the BBC's take on OP's story:

Ecuador defaults on foreign debt

Page last updated at 00:49 GMT, Saturday, 13 December 2008

Speaking in the city of Guayaquil, Mr Correa said "as president I couldn't allow us to keep paying a debt that was obviously immoral and illegitimate", according to the AFP news agency.

"We'll present a proposal to restructure the debt in order to resolve this problem as fast as possible," added the US-trained economist and ally of left-wing Venezuelan President Hugo Chavez.

His decision follows a government audit in November which recommended that Ecuador default on almost 40% of the $10bn foreign debt, accusing former officials and bankers of profiting irresponsibly from bond deals.

The country's foreign debt amounts to about a fifth of its Gross Domestic Product, or GDP.

In the past, Mr Correa has vowed to put money he has earmarked for spending on public programmes - ahead of paying foreign debt.

http://news.bbc.co.uk/2/hi/business/7780984.stm

[bitchkitty]

8. If I didn't know better,

reading all the articles that mention Chavez, I would think that his first name was "Anti-US President".

Chavez is not anti-US. He IS anti-Bush.