Ecuadors government plans to launch a new bond next
year, which, if it materializes, will mark a return to
international markets six years after its last default.
We are looking at options for financing next
year, Fausto Herrera, deputy finance minister told
Emerging Markets yesterday. Floating a bond is
one of the alternatives that could generate resources next
The catch for the government is dealing with holdouts from
its default on $3.2 billion in bonds in 2008, and new moves by
President Rafael Correas government that could cancel
some bilateral investment treaties (BIT).
The government bought back 91% of the 2030 bonds the
following year, but it never managed to close the deal with a
small group of bondholders. Herrera said the government was
working on new formulas. We will offer new
conditions this year to resolve any outstanding problems,
Herrera did not elaborate on the new mechanisms or the
amount of the possible bond, which was still under
consideration. In remarks earlier yesterday to
LatinFinance, he said a new exchange offer to
solve the issue of the holdouts on the defaulted bonds would be
made in the first semester.
Another hurdle is the Correa administrations decision
in early March to submit legislation to Congress, which its
party controls, asking them to annul a bilateral investment
treaty with the United States. Ecuador has 22 other investment
protection treaties in place besides the one with the United
The issue with the US treaty is linked to several cases
involving oil companies brought to international arbitration
agencies under the BIT.
One of the cases concerns the 20-year battle between oil
giant Chevron and 30,000 plaintiffs from indigenous communities
over alleged contamination. The company was fined $19 billion
in 2011 in the case.
Chevron won a ruling from the Permanent Court of Arbitration,
based in The Hague, demanding that the government do what was
necessary to stop enforcement of the decision.
Ecuador also lost a case with Occidental Petroleum at the
World Banks International Centre (CORR) for the
Settlement of International Disputes (ICSID) and was ordered to
pay $1.77 billion for taking over assets in a dispute from the
past decade. It has two other cases with oil companies,
US-based Burlington Resources and Francess Perenco,
Analysts and ratings agencies said that liquidity in the
market and the appetite for paper made Ecuadors plan
I think Ecuador is a pretty decent credit. I
dont think it would have a hard time coming to
market, said Walter Molano, of US-based BCP
Rating agencies Fitch and Standard & Poors also
believe that Ecuador might be able to do it, given bonds
floated by countries with lower ratings. Bolivia, Honduras and
Paraguay have all come to the market and were all
If they were to issue, I think the markets would be
open, said Joydeep Mukherji, S&Ps managing
director of sovereign ratings.
Santiago Mosquera, a director in Fitchs sovereign
group, said that despite a few rough patches he expected
Ecuador to be in a better spot in the coming years. This could
also help increase appetite. The government is spending
heavily on infrastructure. I think that they are going to be in
a better position in a couple of years, he said.
- Like every year, Emerging Markets daily newspaper covers
the Inter-American Development Banks annual meeting, held
in Panama in mid-March. Pick up your copy at the meeting, read
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