Ecuador Leader Assures Public
Oct. 04, 1999
QUITO, Ecuador (AP) _ President Jamil Mahuad assured his countrymen Monday that disgruntled foreign creditors will not be able to seize Ecuador's imports nor lay claim to private holdings of Ecuadorean businesses overseas.
Creditors on Friday rejected Ecuador's pleas for more time to renegotiate its $6 billion in partly U.S.-guaranteed Brady bond debt and instead demanded immediate repayment of $1.4 billion.
Anticipating a bevy of lawsuits to force repayment, Mahuad on Monday quoted legal advisers saying the nation's exports and private holdings overseas would be safe.
Creditors could only seize property of the Ecuadorean Republic and ``could not affect private goods, for example shrimp or banana exports,'' Mahuad said in a televised interview on Channel 8.
``It is not as if they won't try, but legally we are protected,'' Mahuad said. ``In the meantime, we will continue negotiating.''
Ecuador, facing its worst economic crisis in decades, on Thursday missed a $44.5 million interest payment on bonds backed by U.S. Treasury Department securities.
Ecuador last renegotiated its foreign debt in 1994, repackaging bad bank loans into publicly traded Brady bonds _ a plan conceived by former U.S. Treasury Secretary Nicholas Brady to deal with the Latin American debt crisis of the 1980s.
Ecuador had proposed to dip into its U.S. Treasury securities collateral as partial payment to lower to overall debt burden and to swap the outstanding Brady bonds for shorter-term, higher-yield instruments with a lower face value.
But holders of $1.4 billion of Ecuador's $6 billion in Brady bonds voted Friday to reject the offer and demanded immediate payment of principal and interest.
Mahuad said the unprecedented Brady bond default and repayment demand will not derail a loan agreement signed last week with the International Monetary Fund. The IMF credit is expected to trigger $1.25 billion in international assistance.
The IMF accord is contingent on Ecuador passing austerity measures and tax increases, but Ecuador's Congress is dominated by opposition parties opposed to Mahuad's proposed reforms.
Ecuador's total public debt is $13 billion and is expected to top 117 percent of the small Andean nation's gross domestic product by the end of the year.