Merrill Sees Limited Ecuador Default Risk

Declining oil prices and the continued global markets mayhem could prompt some marginal sovereigns to throw in the towel. But Merrill Lynch, for one, does not expect Ecuador to default. “We do not believe that the country’s ability to pay is at risk. If oil prices fall below $75/barrel, Ecuador will have to start dipping into reserves,” says Merrill. Crude slumped under $75 to close at $74.54 Wednesday, lowest in 13 months, according to Reuters. “We expect the government to continue servicing the ‘12s, ‘15s and ‘30s,” it adds. Although an internal government report recommended stopping paying those bonds as they were considered “illegitimate” debt, President Correa appears unsupportive of defaulting, the shop adds.