MercoPress. South Atlantic News Agency

Ecuador firm on its sovereign bonds sharp discount buy-back scheme

Ecuador will not change its offer to buy back 3.2 billion of defaulted debt at a sharp discount (70%), and appealed to investors to be mindful of its economic problems, Finance Minister Elsa Viteri said in a letter to bondholders, according to press reports from Quito.

“Ecuador does not intend to make any further invitations or offers in respect of the 2012 and 2030 bonds” Viteri said in the letter which marked a softening of the aggressive language against investors and said it was “mindful” of the interests of bondholders.

Viteri said that even as Ecuador's cash reserves plummet, the government has set aside the needed funds to buy back debt at the minimum prices of 30 cents on the dollar. She also called on bondholders to carefully consider the tender as the country has “only limited flexibility in the use of additional reserves.”

“We look forward to restoring relations with the national and international investor community.”

Economic Policy Minister Diego Borja said on Tuesday the country had the $900 million needed to buyback all debt at a 70 percent discount, calling the price “fair for both sides.”

Ecuador, which in December refused to pay the global bonds over charges the debt had been illegally issued by past governments and unfair to the poor country, on Monday offered to buy back the defaulted debt via an auction with a 70 percent discount.

Analysts had said then that it was unclear if bondholders would cut losses and take the deal or dig in for a protracted battle.

Ecuador has said it wants to avoid legal battles with bondholders as its economy is already feeling the pinch of lower oil prices that has cut its cash reserves by half in only six months. Oil is the OPEC member main export.

Growing unemployment and a slowing economy are seen as the biggest threat to populist President Rafael Correa, who is widely expected to win a second term in office on Sunday April 26 vote.

Correa's bold move on the global bonds in December had shocked investors, but it captivated Ecuadoreans who in part blame foreign interests for their country's perennial poverty.

A US-trained economist, Correa has followed the lead of other Andean presidents such as Venezuela's populist leader Hugo Chavez and conservative Alvaro Uribe of Colombia, who pushed through constitutional changes to extend their rule.

Although more moderate than his main populist allies, Chavez, President Evo Morales of Bolivia and Daniel Ortega from Nicaragua, Correa has raised spending on education and health, winning the support of a poor majority that was for long neglected in the world's top banana exporter.