Ecuador´s Correa Says Will Seek To Annul Some Debt

Javno.com, 7 June 2008
´There will be civil and administrative actions to seek the annulment of illegitimate debt,´ Correa said during a weekly radio address.

Ecuadorean President Rafael Correa said on Saturday he will seek to annul parts of the country's $10.3 billion foreign debt after a preliminary audit report showed indications of "illegitimacy" in borrowing.

Correa said a debt commission created last year, comprised mainly of leftist economists and his former economy minister Ricardo Patino, had found irregularities in borrowing by previous governments.

"There will be civil and administrative actions to seek the annulment of illegitimate debt," Correa said during a weekly radio address.

"We can show how many times the lawyers Ecuador hired were the same lawyers that worked for bondholders. ... They stole billions of dollars, those lowlifes, who today are working with the International Monetary Fund and World Bank, and some are still working in the central bank."

Correa, a leftist former economy minister, had previously pledged to stop repaying debt he says was contracted under unfair terms by past corrupt administrations and that forced his poor nation to slash education and health spending.

But the U.S.-trained economist has softened his tone since he took office last year. He has not halted payments but has said he would use market-friendly mechanisms to lower the debt burden.

Wall Street analysts see it as unlikely that Ecuador, which is flush with cash from oil exports, would stop repaying its debt this year, and that Correa could be adopting a tough anti-debt stance to gain support before he faces an expected election early next year.

Correa did not say how much of the debt is illegitimate.

A preliminary report released last week by the commission said the global bonds were illegitimate because they resulted from an unfair renegotiation in which the state paid much more than the paper actual market value at the time.

Global bonds due in 2012, 2015 and 2030 total around $3.8 billion, according to Finance Ministry data.

The commission will release its final report in July and has said Correa has the last word on any debt annulment, which could be done unilaterally or as a restructuring of credits or a swap.