By Alexandra Valencia and Alonso Soto
QUITO, July 8 (Reuters) - Ecuador's leftist government seized two television stations and almost 200 other companies on Tuesday in a debt dispute with a large business group, apparently prompting the finance minister to quit in protest.
President Rafael Correa sent police to the TV stations, knocked normal programming off the air and appointed new news chiefs in a move that raised concerns over media freedoms but also showed him ready to challenge Ecuador's economic powers.
The government's communications regulator later threatened to close down more than a dozen radio stations that continue operations after their concessions were canceled.
The mass confiscation ranged from retail to insurance firms owned by the Isais Group, which the government says owes the country tens of millions of dollars after its bank collapsed a decade ago.
The seizures came as Correa seeks to bolster support for a referendum this year on a new constitution that would boost his control over political institutions and the economy.
Ecuador's bond prices tumbled on the news of the takeovers and then fell further when Finance Minister Fausto Ortiz stepped down to be replaced by a former banking regulator who advocates debt cancellation for poor nations.
Ecuador's most actively traded bond, the global due in 2030
Correa, who took office in the politically unstable Andean country last year, has frequently attacked the media and vowed to eliminate what he calls corrupt elites.
"Correa is seeking populist measures to gather support for the constitution referendum," said Patrick Esteruelas, an analyst with Eurasia Group in New York. "The latest polls show his support is not growing."
The TV stations, whose editorial line is sometimes critical of the government, have small audiences compared with other national channels in the oil- and banana-exporting nation.
DEBT STORM
Outside one station, some drivers honked their horns in support of Correa and shouted "Good job."
The state agency overseeing the confiscation said it planned to transfer the assets to the private sector as soon as possible.
"We will keep those companies to recover the assets that belong to all those Ecuadoreans who were affected by the (1998) financial crisis," incoming Finance Minister Wilma Salgado said.
Both stations, Gamavision and TC Television, played soap operas on Tuesday instead of their normal news programs.
Jose Toledo, a prominent journalist, said Correa had appointed him to run Gamavision's editorial department at a meeting on Monday. The government made similar appointments at TC, said other officials who asked not to be named.
Ortiz, the departed finance minister, is a moderate generally liked by Wall Street and foreign investors. A ministry spokesman did not give a reason for the resignation.
One private TV channel, citing Toledo, said Ortiz stepped down over the seizures, storming out of Monday's meeting.
Salgado, a former state banking regulatory official, told Reuters she would prioritize social spending over making debt payments.
She had been under a judicial investigation for her role as former head of a bank depositors' agency but was pardoned by Correa allies in the legislature just last week.
Gamavision's president, Alvaro Dassum, criticized the takeover, denying a direct relationship between the channel and the bank debts that the government cited for the intervention.
"The government wants to shut up media that has been dedicated to telling the truth," he said.
The move raised new concerns over media freedoms in the Andean region after Correa's leftist ally, Venezuelan President Hugo Chavez, shut an opposition station last year, sparking weeks of mass street protests.
Correa has approval ratings above 50 percent but pollsters say some voters dislike his confrontational style.
The 44-year-old ex-college professor has a quick temper and last year angrily ejected a journalist from his weekly radio program for insisting on a line of questions about education.
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