Southern Affairs

By Katia Porzecanski and Nathan Gill (Bloomberg) -- Six years ago, Ecuador President Rafael Correa’s government denounced the 10 percent in annual interest the country paid on its bonds as “usury.”
So when the 51-year-old former economics professor was willing to pay 10.5 percent in a sale of notes this month, it raised speculation the OPEC nation may be running short of cash after oil prices collapsed.
Before the March 19 sale, Ecuador told potential buyers it wanted to pay less than 8 percent to borrow at least $1 billion for as long as seven years, two people with knowledge of the offering said. Instead, the Andean nation got just $750 million for five years at yields that were more than two percentage points higher.
The sale “indicates that they are running into trouble,” Sarah Glendon, an economist at Gramercy Funds Management LLC, said by telephone from Greenwich, Connecticut.
The more than 50 percent plummet in the nation’s oil prices from their June peak last year caused bond…

By Nathan Gill
     (Bloomberg) -- The rate of growth in Ecuador, South America’s seventh biggest economy, slowed for a third year in 2014 as falling crude oil prices and a refinery shutdown offset gains from higher fishing and electricity output.
Gross domestic product rose 3.8 percent in 2014 from a year earlier, less than the government’s 4 percent forecast, the central bank said Saturday in a statement on its website. Growth was the slowest since 2010’s 3.5 percent. In the fourth quarter, GDP rose by 0.5 percent from the previous three months and 3.5 percent from a year earlier.
Ecuador, an OPEC nation that relies on oil for about half its export revenue, saw prices for its Oriente and Napo crudes drop by about 50 percent by year-end from a June peak of $98.90 a barrel. That cut funds the government uses to finance public works projects that generate jobs and economic growth.
Maintenance on Ecuador’s biggest oil refinery starting in July cut local fuel output by 48 percent last y…

By Nathan Gill (Bloomberg) -- Ecuador got $924 million in previously undisclosed loans from Deutsche Bank AG and other lenders, showing the extent of President Rafael Correa’s effort to line up a record amount of financing as oil prices plunge.
The country took $181 million in two separate loans from units of Deutsche Bank and obtained $125 million from the European Investment Bank, according to a prospectus prepared before the government sold bonds this month that was reviewed by Bloomberg News. Ecuador also got financing from Bank of China Ltd. and a Chinese state oil company, the document shows.
The 50 percent drop in oil prices over the past 12 months has pushed the Andean nation’s financing needs to a record $10.5 billion this year, prompting Correa to court banks, international debt investors and foreign governments to make ends meet. Last week the country sold $750 million of bonds with a 10.5 percent interest rate, the highest for any major dollar-bond sale this year.
Ecuador…

By Nathan Gill (Bloomberg) -- Union Andina de Cementos SAA, Peru’s biggest cement supplier, expects growth in exports will help offset weakening demand from local miners.
Overseas sales of clinker, an ingredient in cement production, will surge 18 percent to about 500,000 metric tons this year, Ricardo Rizo Patron, chairman of the company, said Wednesday in an interview in Quito. Demand for its construction materials in Peru will probably rise this year and next, he said.
“The increase in exports is very interesting because it provides us with dollars,” Rizo Patron said. “I think 2015 will be a better year than 2014, and 2016 will be even better.”
The Lima-based company, which also operates in Chile, Colombia and the U.S., also expects construction of housing and large infrastructure projects in Peru to offset a slowdown in demand from the nation’s mining industry, Rizo Patron said. The company isn’t planning any new debt or equity sales this year and won’t change its investment plan…

By Katia Porzecanski and Nathan Gill (Bloomberg) -- Ecuador sold $750 million of five-year bonds overseas to meet its financing needs amid a plunge in the price of crude oil.
The country sold the securities to yield 10.5 percent, according to a person familiar with the matter, who isn’t authorized to speak publicly and asked not to be identified. Citigroup Inc. is managing the sale, the person said.
Ecuador, facing a funding shortfall of more than $10 billion this year, is returning to bond markets for the second time since defaulting on $3.2 billion of bonds six years ago. Borrowing costs for the nation have jumped more than a percentage point since officials began meeting with investors March 9 as oil, the nation’s biggest export, extended declines.
“The fact that Ecuador is going for it probably shows that the nation will do what it must to fund its financing needs,” Juan Lorenzo Maldonado, a Latin America economist at Credit Suisse Group AG, said by telephone from New York.
The n…

By Nathan Gill (Bloomberg) -- When President Rafael Correa defaulted on most of Ecuador’s overseas debt in 2008, he disparaged bondholders as “true monsters.”
Now, he’s increasingly dependent on their goodwill.
Ecuador hired Citigroup Inc. to arrange meetings with investors to gauge demand for what would be the nation’s second international bond sale in the past year, according to the Finance Ministry. After relying predominantly on China for foreign funding in the years following the default, Correa is turning more often to bond markets as the collapse in oil prices pushes the Andean nation’s financing needs to a record $10.5 billion this year. The plan comes after Correa, a self-described socialist, cut government spending for the first time since he took office in 2007, helping to win over investors and drive down Ecuador’s borrowing costs by the most in Latin America.
“The composition of their financing is still worrisome, so to the degree that they can move to more transparent f…