Friday's news brought the statement by Ecuadorian President Rafael Correa that the foreign debt he has ordered left un-served is "immoral", and that for no reason other that that Ecuador shall default on the debt when the timer runs out on Monday.
Yeah, yeah, and usury used to be against canon law too. Maybe he'll show up on Monday for a press conference dressed as a priest?
The trick in all this this was the failure to service interest was a buy-back fraud. By triggering the 30 day default timer last month, the price of Ecuadorian global bonds dropped like a stone, and the GovEcuador was then buying them up cheap to self-reconcile them.
More on this all here, at Reuters.
The game is now coming to its end and either R. Correa will hide behind recently rewritten local laws or it will be fight time in the legal system over the default.
The utterly foolish thing about all this is: Ecuador defaulted widely only 10 years ago. Any non-State lender who was willing to go back into a market so badly tainted almost deserves to take the loss this time too.
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4 comments:
and how is the economy there?
The short answer is:
No where near as good as it was when Oil was overpriced. ~60% of foreign exchange earnings from Oil.
It was also never good enough (even when Oil was so high) to support the spending plans of the Correa government.
Camargo has an interesting perspective on this
By pushing down the prices, artificially at least, it will provide the facade of a semi-functional economy, particularly in light of oil prices tanking even more at Friday's close. This bubble can only exist for so long, despite the Ecuadorian government's well-executed media campaign to maintain such levels of popularity.
Follow-up items:
. Seems that Oil revenues are also about 40% of *total* GovEcuador revenues.
.. No matter how screwed up the economy is, it seems there is always money for more guns, and looky-here who R. Correa is visiting on his shopping trip.
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