World Economic News
Ecuador Prez Candidate Moots 'Argentine Style Debt Restructuring'; Wall Street Gets Jitters
During a trip to New York Sept. 10-16, Ecuadoran Presidential candidate Rafael Correa said, "We cannot dismiss an Argentine solution," when asked about dealing with this small oil-producing country's $10.37 billion foreign debt. He insisted that no more than 3%-3.5% of a country's GNP should be devoted to foreign debt service. Ecuador is currently paying 7%. Speaking to an investors group in Manhattan, Correa said, "We have to pay Ecuadorans first, especially their social needs." He also said that all debt would be reviewed, as most loan deals have proven "detrimental" to the country's interests.
Correa, an outspoken nationalist who was Ecuador's Finance Minister until his ouster last year, is running a close third in the polls. Ecuador's hotly contested Presidential election is scheduled for Oct. 15. Correa is a strong supporter of the current government's decision last May to oust Occidental Petroleum from Ecuador and take back its oil fields. Correa is also a furious opponent of a free-trade agreement with the U.S., currently trammeled up in negotiations, and says his government would take back control of the Manta military base that has served as a U.S, military outpost in the Andes since 1999. He says his government would break ties with the IMF and World Bank, and supports South American integration and a regional currency, which he says would enable Ecuador to pursue "an orderly exit" from dollarization.
At least one of the investment houses attending Correa's Sept. 12 presentation in New York City, Morgan Stanley, told media that while some candidates often talk tough before elections but moderate their line after being elected, "it would be naive" to speculate that a President Correa would not default, "given his comments this morning and the consistency of his view on debt."