How socialists deal with debt

Ecuador Still Undecided on Debt Default, Viteri Says

By Stephan Kueffner and Christopher Swann

Dec. 11 (Bloomberg) -- Ecuador hasn’t decided whether to default on foreign debt as oil revenue plunges and doesn’t take the decision “lightly,” Finance Minister Maria Elsa Viteri said.
President Rafael Correa will announce the decision when he is ready to do so, Viteri told reporters today in Washington. She’s scheduled to meet U.S. congressional staff during the trip as the government seeks to drum up support for its position that much of its foreign debt was contracted illegally.

“This should not affect other debt issuance in the future,” Viteri said.

Ecuador has threatened to default on $3.9 billion in bonds because it says a government-commissioned audit found evidence of criminal violations in connection with the issuance of the debt. The government skipped a $30.6 million bond payment on Nov. 15, invoking a 30-day grace period.

Ecuador’s 12 percent bond maturing in November 2012 was little changed from yesterday at 31 cents on the dollar, yielding 58.62 percent at 11:53 a.m. New York time, according to JPMorgan Chase & Co. The price has fallen from 42 cents on Nov. 12 before Ecuador skipped the payment.
Correa has said the Ecuador will only repudiate debt in a legal manner, even though a government audit commission has found evidence that the obligations in dispute are “illegal” and “illegitimate.”

Viteri said the government expects the price of local crude to average $40 a barrel next year, down from an earlier $85 estimate. Oil accounted for $3.7 billion out of $9.1 billion in government revenue through the end of August this year, according to the central bank.
“The first quarter would be the toughest,” Viteri added.

The government says it uses oil income to fund investments in roads and other infrastructure.