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  HOME | Ecuador (Click here for more)

Ecuador Touts Buyback of Defaulted Bonds

QUITO – Ecuador’s government spent some $900 million to repurchase 91 percent of the Global 2012 and 2030 bonds that have been in default since last December, a senior official said Friday.

“There’s not a country in the world that has done or achieved something similar to this,” the minister of policy coordination, Ricardo Patiño, said.

He noted that between 2008 and 2030, Ecuador would have had to pay some $8 billion in principal and interest on those bonds.

“With an amount (of roughly) $900 million, we retired those bonds from the market,” the minister told Gama television, noting that that sum was provided for in the government’s 2009 budget.

Patiño said the action represents a “relief” for the national treasury and will help with plans to “continue with social and productive investment.”

He said that approximately $290 million in bonds, or 9 percent of the total, remained on the market after the buyback.

“This has been positive all around: we’ve shown the international financial community that there are legitimate, sovereign governments that are capable of putting the interests of their society ahead of the interests of creditors,” he said.

Patiño called the operation a “phenomenal triumph” for the government in terms of its debt and added that the possibility of any legal action by creditors against Ecuador is “almost nil.”

He acknowledged that during the process there was “a certain amount of fear” among Ecuadorian finance officials over possible lawsuits, but they now feel calm about the decision.

The Ecuadorian government announced Thursday that it retired 91 percent of the Global 2012 and 2030 bonds from the market, having bought them at 35 percent of their nominal value.

In April, the Ecuadorian government undertook the process of retiring the Global 2012 and 2030 bonds, noting that debt service had cost the country $3.3 billion since 2000, more than the total face value of the debt.

After learning of the result of the operation, President Rafael Correa announced Thursday that “we are very close to declaring Ecuador a country free of illegitimate foreign debt.”

Correa, a U.S.-trained economist who has referred to the foreign debt as “a noose” that subjugates his country and others in Latin America, created a commission last year to study Ecuador’s foreign liabilities.

The commission concluded that some tranches of the foreign debt, such as the Global 2012 and 2030 bonds, had elements of “illegitimacy” because they had been negotiated or renegotiated illegally.

Ecuador continues to pay interest on Global 2015 bonds and other obligations that Quito deems legitimate.
 

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