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Showing posts from January, 2015

Ecuador’s Dollar Reliance Worsens Impact of Oil, Correa Says

By Nathan Gill
(Bloomberg) -- President Rafael Correa, a former economics professor critical of Ecuador’s use of the dollar as its official currency, said the greenback is worsening the impact of falling crude prices as liquidity in the economy contracts.

The reliance on the dollar means the government can’t print more money to increase the amount of cash circulating in the economy, hurting growth, Correa said in comments from Costa Rica, broadcast on the presidential website. The country adopted the dollar in 2000 after a banking crisis in the 1990s.

Ecuador depends on crude for about half of its export revenue, and the nation is taking steps to minimize the fallout on the economy from lower oil prices, he said. The government, which defaulted on $3.2 billion of the nation’s foreign bonds six years ago, announced this month that it would cut planned public spending by about 4 percent and take on more debt with China to offset the plunge in crude.
Lower oil prices “hit us hard,” Correa …

Bondholders Embracing Chavez’s Disciple in Ecuador: Andes Credit

By Nathan Gill (Bloomberg) -- Nicolas Maduro and Rafael Correa are both socialist disciples of the late Venezuela President Hugo Chavez, but only one is managing to convince bondholders he’s got the ability to weather the collapse in oil prices.
While Chavez’s handpicked successor Maduro is struggling to ward off a default, Ecuador counterpart Correa is getting a vote of confidence as he cuts spending and lines up more than $7.5 billion in loans from China. Ecuador’s benchmark notes due 2024 have gained 2.3 percent in the past month, compared with a 16 percent plunge in similar-maturity Venezuelan securities.
Correa, who has long allied himself with Chavez’s socialist ambitions and declared three days of mourning to mark his death, is now deviating from policies that saw him use Ecuador’s oil wealth to finance record spending. Maduro’s refusal to break with the currency controls and gasoline subsidies embraced by Chavez is deepening concern that Venezuela, which gets about 95 percent…

China Rescues Ecuador Budget From Deeper Cuts as Crude Drops

By Nathan Gill (Bloomberg) -- Ecuador, an OPEC nation that relies on crude for about a quarter of revenue, obtained enough financing from China to avoid deeper budget cuts even as its oil price fell below $40 a barrel, Finance Minister Fausto Herrera said.
The Latin American country expects total financing needs for 2015 to rise to about $10.5 billion from a previous estimate of $8.81 billion, Herrera said today in an interview at his office in Quito. The government will use loans from China, multilateral lenders and the nation’s social security agency to help offset a drop in the price of crude, the nation’s biggest export, he said. The ministry isn’t planning to sell international bonds this year after global interest rates rose, he said.
Ecuador’s government announced last week that it would cut $1.42 billion of public spending on items such as new schools and police stations while going deeper into debt with the Asian nation. On top of the $7.5 billion in Chinese loans and credit…

China Rescues Ecuador Budget From Deeper Cuts as Crude Drops

By Nathan Gill (Bloomberg) -- Ecuador, an OPEC nation that relies on crude for about a quarter of revenue, obtained enough financing from China to avoid deeper budget cuts even as its oil price fell below $40 a barrel, Finance Minister Fausto Herrera said.
The Latin American country expects total financing needs for 2015 to rise to about $10.5 billion from a previous estimate of $8.81 billion, Herrera said today in an interview at his office in Quito. The government will use loans from China, multilateral lenders and the nation’s social security agency to help offset a drop in the price of crude, the nation’s biggest export, he said. The ministry isn’t planning to sell international bonds this year after global interest rates rose, he said.
Ecuador’s government announced last week that it would cut $1.42 billion of public spending on items such as new schools and police stations while going deeper into debt with the Asian nation. On top of the $7.5 billion in Chinese loans and credit…

Ecuador Gains $5.3 Billion Credit Line From China as Oil Tumbles

By Nathan Gill (Bloomberg) -- The Export-Import Bank of China granted Ecuador a $5.3 billion credit line after a slide in oil to an almost six-year low prompted spending cuts for the OPEC member.
Finance Minister Fausto Herrera said in a statement published today in the president’s official gazette that the Andean nation will use about $1.5 billion of the funds this year to finance public-work projects such as irrigation and transportation. The credit line will have a 30-year maturity and an interest rate of 2 percent, according to the statement.
President Rafael Correa, a 51-year-old former economics professor, traveled to China this week to ask for loans to help prop up public spending after the price of crude, Ecuador’s biggest export, plunged to its lowest level since April 2009. The government announced yesterday that it would cut the 2015 budget by $1.42 billion, or almost 4 percent, because of a decline in oil revenue.
China “is very interested in continuing to finance because…