Ecuador will return to international credit markets “when the moment is opportune” after defaulting on $3.2 billion of debt in 2008 and 2009, central bank President Pedro Delgado said.
“We are working very hard on this, and various groups from our economic teams have been visiting investors, investment banks and ratings agencies,” Delgado said in a July 7 interview in Cartagena, Colombia. “We are in this process and we’ll do it when the moment is opportune.”
Ecuador, the Organization of Petroleum Exporting Countries’ smallest member, has tapped its public pension fund and relied on Chinese loans to help finance its budget since the default. The central bank will also repatriate $1.1 billion of reserves now held overseas to fund projects such as infrastructure, President Rafael Correa said July 7.
Ecuador is “very advanced” in the process of negotiating a new loan from China, Delgado said. The government also sought a $515 million loan from the Latin American Reserve Fund to cover increased costs for fuel imports that are set to rise when the nation’s biggest refinery goes offline for repairs later this year.
The extra yield investors demand to hold Ecuador’s dollar bonds instead of U.S. Treasuries rose two basis points, or 0.02 percentage point, to 872 basis points on July 6, according to JPMorgan’s EMBI+ index. That’s the third-highest spread among 15 emerging markets tracked by JPMorgan, after Argentina and Venezuela.
An international crisis could affect Ecuador through a fall in remittances and reduced demand for the Andean nation’s exports, Delgado said. Since the country doesn’t have its own currency, it needs to manage its supply of dollars carefully, he added.
“The Ecuadorean economy functions to the extent that there are dollars,” Delgado said. “What could happen is a problem of the stock of money, so we have to control precisely the liquidity of the stock of dollars that we have in the economy.”
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