ECUADOR: Big Bucks from China Drive Domestic Development
Ecuador sees the loans it has agreed with China as 'good news,' because they are long-term, and all that is required in return is 'oil, and not the horrendous adjustments imposed by the IMF (International Monetary Fund),' leftwing Ecuadorian President Rafael Correa told analysts critical of the size and high interest rates of the loans.
At his first press conference with foreign correspondents in 10 months, Correa said some people 'are raising Cain because we have promised to sell 52 percent of our crude oil to China,' as payment for the loans. But 'in the past, more than 75 percent (of Ecuador's oil) went to the United States, with nothing to show for it, and nobody complained,' he said.
Correa said the latest Chinese loan for two billion dollars, divided into two tranches, is to be repaid over eight years at an average weighted interest rate of 6.9 percent.
The total amount China has lent to Ecuador has not been officially disclosed, and analysts' calculations based on partial data do not tally. According to economist María de la Paz Vela, the sums borrowed come to over 7.2 billion dollars, equivalent to 11.7 percent of GDP.
The latest credit 'covers the country's annual investment programme for 2011,' said the finance minister, Patricio Rivera. 'We won't be losing any more sleep over how the international markets will treat us,' replied Correa when asked if Ecuador would launch another bond issue, and he added that this Andean country will not be approaching the IMF for credit.
'We will try to re-enter the markets, but if that is not possible, we will carry on as we are,' he said, a possible indication that there may be a pilot plan to issue sovereign debt, but with no rush to do so.
'The big risk now is bonds from the United States, not from Ecuador,' Correa joked, referring to the financial crisis originated in the United States in 2008 which brought that country to the brink of default, headed off at the last minute this week thanks to a decision by the U.S. Congress to raise the country's debt ceiling.
'The United States debt represents more than 95 percent of its GDP, while Ecuador's is only 23 percent of GDP,' Correa said. Correa said that the Jul. 28 summit of the Union of South American Nations (UNASUR) in Lima decided to study 'conjunctural and structural measures' to deal with the fall-out from the crisis in Europe and the United States, which he regards as structural in nature.
Asked by IPS about the secrecy that since 2009 has surrounded the credit arrangements with China, Rivera said that China had requested confidentiality because 'the conditions granted to Ecuador are more favourable' than for other countries, and the Chinese government wanted the details kept under wraps. Rivera confirmed that three billion dollars in debt will fall due on the loans from China in 2011-2012.
© Inter Press Service (2011) — All Rights Reserved. Original source: Inter Press Service