Correa, speaking in his regular Saturday radio-and- television broadcast, said he wants bondholders who had bought the debt in good faith to recoup some of their investment, while repeating his belief that most of the $3.9 billion owed is “illegal.”
“We’re preparing a restructuring plan with a very big discount because there is a legitimate part to the debt,” he said. “We want to present a proposal where some value of the debt is recognized but at a much lower price than what they say we owe.”
Correa, a 45-year-old economist, yesterday refused to give the order to make a $30.6 million interest payment due Dec. 15, when a monthlong grace period expired. The $510 million bonds due in 2012 plunged to 23 cents on the dollar from 31 cents the previous session and 97.5 cents three months ago.
“I really couldn’t give the authorization to pay the interest on those debts,” Correa said. “We know that this could bring us grave consequences and I personally assume full responsibility in case this costs the country too much.”
Prayed to God
Ecuador is preparing a legal defense and lawsuits as well to prevent Ecuadorean overseas assets from being seized. “There are great risks in this,” Correa said. “There are external vultures and internal vultures as well.”
By defaulting, Correa, an ally of Venezuelan President Hugo Chavez, fulfills a pledge he has made since a 2006 presidential campaign that ended in a landslide victory. His decision comes as a deepening global economic slump throttles demand for oil, the country’s biggest export. Ecuador, which defaulted in 1999, owes about $10 billion to bondholders, multilateral lenders and other countries.
“The debt has been repaid several times,” Correa said. “At the beginning of the ‘80s, we had $4 billion in debt. We’ve paid more than $7 billion over the past decades and still we have almost $3.6 billion in debt.”
A debt commission Correa formed last year said in a 172-page report in November that the global bonds due in 2012 and 2030 “show serious signs of illegality,” including issuance without proper government authorization. Correa invoked the 30-day grace period on the interest payment last month, saying he wanted to analyze the commission’s findings.
“I’ve lost a lot of sleep over this and prayed a lot so that God could help me make the right decision,” said the president, who has a doctorate from the University of Illinois at Urbana-Champaign.