By Stephan Kueffner
Dec. 13 (Bloomberg) -- Ecuadorean President Rafael Correasaid he wants bondholders to accept a “very big” discount indebt renegotiations triggered by the South American country’ssecond default in a decade.
Correa, speaking in his regular Saturday radio-and-television broadcast, said he wants bondholders who had boughtthe debt in good faith to recoup some of their investment, whilerepeating his belief that most of the $3.9 billion owed is“illegal.”
“We’re preparing a restructuring plan with a very big discount because there is a legitimate part to the debt,” he said. “We want to present a proposal where some value of the debt is recognized but at a much lower price than what they say we owe.”
Correa, a 45-year-old economist, yesterday refused to give the order to make a $30.6 million interest payment due Dec. 15, when a month long grace period expired. The $510 million bonds due in 2012 plunged to 23 cents on the dollar from 31 cents the previous session and 97.5 cents three months ago.
“I really couldn’t give the authorization to pay the interest on those debts,” Correa said. “We know that this could bring us grave consequences and I personally assume full responsibility in case this costs the country too much.”
Prayed to God
Ecuador is preparing a legal defense and lawsuits as well toprevent Ecuadorean overseas assets from being seized. “There aregreat risks in this,” Correa said. “There are external vulturesand internal vultures as well.”
By defaulting, Correa, an ally of Venezuelan President HugoChavez, fulfills a pledge he has made since a 2006 presidentialcampaign that ended in a landslide victory. His decision comes asa deepening global economic slump throttles demand for oil, thecountry’s biggest export.
Ecuador, which defaulted in 1999, owesabout $10 billion to bondholders, multilateral lenders and othercountries.
“The debt has been repaid several times,” Correa said.“At the beginning of the ‘80s, we had $4 billion in debt. We’vepaid more than $7 billion over the past decades and still we havealmost $3.6 billion in debt.”
A debt commission Correa formed last year said in a 172-pagereport in November that the global bonds due in 2012 and 2030“show serious signs of illegality,” including issuance withoutproper government authorization. Correa invoked the 30-day graceperiod on the interest payment last month, saying he wanted toanalyze the commission’s findings.
“I’ve lost a lot of sleep over this and prayed a lot sothat God could help me make the right decision,” said thepresident, who has a doctorate from the University of Illinois atUrbana-Champaign.
To contact the reporter on this story:Stephan Kueffner in Quito at
skueffner@bloomberg.net
Last Updated: December 13, 2008 13:44 EST
