The people of Ecuador are rising up to refound their country as a pluri-national homeland for all. This inspiring movement, with Ecuador's indigenous peoples at its heart, is part of the revolution spreading across the Americas, laying the groundwork for a new, fairer, world. Ecuador Rising aims to bring news and analysis of events unfolding in Ecuador to english speakers.

Thursday, July 26, 2007

Ecuador picks moderate economy chief after scandal

By Alonso Soto and Carlos Andrade

QUITO, July 25 (Reuters) - Ecuador's leftist president, Rafael Correa, replaced his hard-line economy minister on Wednesday with a moderate after Congress censured the minister in a scandal involving charges of debt market manipulation.

Deputy Economy Minister Fausto Ortiz, 42, succeeded Ricardo Patino and immediately adopted a softer line than his predecessor, who had long rattled Wall Street with a threat to suspend some foreign debt payments.

Ecuadorean bonds bounded upward, reversing days of steep declines, even though Correa and Patino said the cabinet moves did not signal a change to the government's radical policies.

Returns on Ecuador's global bonds rose 2.94 percent, JP Morgan data showed, bucking a fall in emerging market bonds.

Wall Street analysts see Ortiz as an expert in debt markets with a reputation as a moderate who prefers market-friendly tools to cut the cost of foreign debt servicing.

Ortiz, who has said his role is to make sure the government avoids a default on its foreign debt, told Reuters Ecuador would not do anything that might jeopardize foreign financing.

After he was sworn in he said spurring economic growth was the priority, not debt restructuring, and that it was possible for the government to both meet its foreign debt obligations and spend on the majority poor.

Correa emphasizes meeting Ecuadoreans' demands before those of foreign investors in a policy he calls "life before debt."

Ortiz was not considered part of the president's innermost political circle, even though he had served as treasurer to Correa when the latter was economy minister in 2005.

Correa said that while the appointment would not change economic policies, it showed the tolerance of different voices in his government.

"Fausto Ortiz will not only continue with our sovereign agenda, but his contribution will also be evidence that we are not a cult but rather a team of thousands of women and men willing to give our lives for our new country," Correa said.


Patino, who moved to head a new and politically important ministry responsible for coastal regions, has been one of Correa's closest aides since his election campaign last year.

Patino was barraged by accusations in the past few months that he manipulated debt markets. Censured by Congress on July 13, he steadfastly denied wrongdoing.

The scandal took a toll on the president's popularity and support in Congress, complicating his efforts to broaden the government's control over private banking.

Ortiz was key in the past administration's sale of $650 million in Ecuador's global benchmark 2015 bonds in 2005, the country's first since defaulting in 1999 and whose proceeds were used to buy back more expensive Ecuadorean debt.

He "is much more experienced on debt and financing issues than ... Patino and is seen as significantly more pragmatic and constructive," wrote Goldman Sachs analyst Alberto Ramos.

The perceived risk on Ecuador's global bonds also fell in global markets on Wednesday, according to data from JP Morgan's Emerging Markets Bond Index Plus.

The index showed the yield spreads between Ecuador's bonds and comparable maturity U.S. Treasuries narrowed 63 basis points to 688 basis points on a day on which emerging market global debt fell in most countries.

The spreads, which narrowed after the appointment, tightened sharply even further after he spoke to Reuters.

Correa moved Patino two months before a national vote to elect members of a new assembly, which will rewrite the constitution and is vital for Correa's leftist agenda.

Patino will be responsible for Ecuador's coastal regions, which traditionally are powerful voting centers, especially in Guayaquil, the country's largest and richest city. (Additional reporting by Carlos Andrade in Quito and Walter Brandimarte in New York)

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