MercoPress. South Atlantic News Agency

Ecuador auditing commission suggests halting bond payments

A commission auditing Ecuador's foreign debt has recommended that the country halt payments on three bonds worth 3.9 billion USD after finding “illegalities” in the obligations.

The global 2012, 2015 and 2030 bonds in question are the product of a debt refinancing in 2000. At the time, Ecuador was in an economic slide that forced 42 Ecuadorean banks to close their doors and the nation to abandon its local currency for the US dollar to halt hyperinflation. Since he took office in 2007 President Rafael Correa has worried investors with threats to stop payments of foreign loans his government considers "illegal" or "illegitimate," or riddled with irregularities when contracted by past administrations. The report says Ecuador's debt has grown "to the benefit of the financial sectors and trans-national companies and clearly went against the interests of the country." According to a preliminary draft of the report issued in September, debt repayments, interest and commissions siphoned public funds away from social spending Several Wall Street analysts suggest Correa's threat could be a bold bid to force bondholders to restructure the country's global bonds due in 2012, 2030 and 2015. OPEC member Ecuador is facing a rapid decline in revenues as the price of its main export, crude oil, slumps on world markets. Wall Street rating agencies have Ecuador among the least credit-worthy nations in Latin America. Ecuador last default was on 5.8 billion USD in bonds in 1999, also amid a sharp fall in oil prices. In related news Ecuador filed an international lawsuit to suspend payment on a loan owed to a Brazilian government bank, charging that the credit's terms are unlawful. Jorge Glas, head of a government fund handling the lawsuit, said the loan granted by BNDES, Brazil's state development bank, was linked to a construction company that was expelled from the country over a contractual dispute. "We are asking (for) precautionary measures, which includes the suspension of the (loan) payment," said Glas, adding that the 320 million USD loan had indications of illegalities.