Ecuador to Try and Make Debt Payment

The Associated Press
Wednesday, January 17, 2007; 10:47 PM

QUITO, Ecuador -- Economy Minister Ricardo Patino said Wednesday that Ecuador's new leftist government would make a programmed $135 million payment on a bond debt in February only if it has money left after increasing social spending.

The statement came just two days after President Rafael Correa took office promising to take steps to renegotiate the country's $16.8 billion foreign debt and direct resources to programs to help the poor.

Patino expanded on Correa's debt program in comments to foreign correspondents, saying that the president's aim was to renegotiate so the debt "doesn't drown us."

He said the government does not plan to pay some "illegitimate" parts of the debt, referring specifically to a $3.2 million loan from the Inter-American Development Bank.

The minister said the government would first allocate financial resources to programs to help the poor, including doubling monthly welfare payments from $15 to $30 for 1.2 million Ecuadoreans and providing microcredits for small businesses.

"If we have the resources, we will certainly pay," Patino said, referring to the scheduled bond payment on February 15. "But first we will pay for the human development bonds. First we will provide microcredits."

Benjamin Ortiz, director of a Quito think tank, said he believes the government will make the debt payment.

"I don't think Correa is going to want a confrontation so early from not making the payment and provoking a collapse of the economy," he said.

During his campaign, Correa did not discard the idea of a moratorium if he was unsuccessful in renegotiating debt payments, but did not refer to that possibility in his inaugural speech.

"I hope there will be resources to service the debt at that time," Patino said Wednesday, referring to the programmed payment on Global Bonds 2030, "until we can begin conversations with creditors about the renegotiation."

He said Ecuador would try to "adequately service the debt and at the same time attend to the needs of society" but that "we are going to prioritize social and economic development."

Correa has rejected negotiating a free trade pact with the U.S., saying it would hurt Ecuador's farmers.

During his campaign last fall, Correa also threatened to cut ties with the World Bank and the International Monetary Fund.


Associated Press Writer Jeanneth Valdivieso contributed to this report.

© 2007 The Associated Press