Correa Remarks Send Bond Prices Tumbling

Ecuador’s president-elect Rafael Correa’s comments to press in Argentina Thursday sent Ecuador’s sovereign bond prices tumbling and the yield on the country’s global 2012 bonds up to 13.8%. The spread on the country’s dollar bonds widened to 637bp following the president’s remarks. In response to a question on his nation’s $10 billion foreign public debt, Correa reiterated his plan to restructure Ecuador’s commercial, bilateral and multilateral debt, and said he hoped the process would be “amicable”. The debt represents 25.3% of GDP; debt service payments represent 6% of GDP, a level that Correa says means Ecuador is “unable to develop”. Ecuador last defaulted on debt in 1999 when it stopped payments on $6.5 billion of government bonds traded internationally. However, analysts remain confident that this time Ecuador will not default but rather restructure.