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Tuesday, September 29, 2009

Ecuador: Restructuring external debt is urgent

* Foreign minister cites production, development needs

* Falconi reiterates criticism of IMF, World Bank (Adds quotes, details, background)

By Haitham Haddadin

UNITED NATIONS, Sept 28 (Reuters) - Ecuador, which last year defaulted on debt before repaying it, said on Monday that restructuring and relief of its external debt was an urgent issue.

Foreign Minister Fander Falconi told the United Nations General Assembly that Ecuador cannot continue to give higher priority to paying external debt services than to financing production and development recovery.

"For our countries the restructuring and relief of our external debt is urgent," the minister said in his speech.

"We cannot continue to give higher priority to paying external debt services in detriment of financing the recuperation of production and development," Falconi added.

Ecuador, a member of the OPEC oil producer group, succeeded in buying back 91 percent of its defaulted 2012 and 2030 global bonds, marking a rare precedent as the first country in modern history to default on its debt, but still able to repay it.

President Rafael Correa, who won office with a campaign slogan "Life before debt," ordered the country's second default in less than a decade last year, following a government audit that declared much of the country's $10 billion foreign debt as "illegitimate."

The Ecuadorian minister criticized the International Monetary Fund (IMF), the World Bank and affiliated institutions for what he said amounted to strong-arm economic and other measures against debtor nations.

"We reiterate our questioning of the role of international credit institutions, IMF and World Bank, since they actively cooperate in implementing strong economic and political measures against nations," Falconi said.

"We also reject, based on principles of sovereignty, the relations with arbitration centers such as CIADI that have only served to judge, sentence and benefit transnational interests over national interests," he added.

CIADI is the Spanish acronym for the World Bank's International Centre for Settlement of Investment Disputes.

"We face a great pending task in regards to the effects of the (financial) crisis," Falconi noted.

"This crisis has shown that capitalism as an economic model and of social relations is not viable," he added.

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