[Marxism] Ecuador defaults on foreign debt
jbustelo at gmail.com
Sun Dec 14 00:13:25 MST 2008
Sartesian asks: "Anybody have more information on this?"
There's been a ton of stuff in the Latin American press, starting with a
report a little more than a month ago that said a lot of Ecuador's so-called
"debts" were issued in contravention to the country's laws and
constitution, for example, the debt instruments claim that the obligations
were duly authorized by the Congress on such-and-such a day, but no records
of such Congressional action can be found.
There also appears to be some question about whether the funds allegedly
lent to the country ever made it there.
At any rate, this is not a normal "default" provoked by inability to pay; it
is a challenge to the legitimacy of the claims on Ecuador by bondholders.
The aim seems to be to get the people that hold the bonds to go after the
banks that floated them in international markets. Ecuador's position is
going to be that either these banks knew or should have known the issues
were not duly authorized; or the banks knew or should have known that they
were part of a fraudulent scheme to divert funds from loans nominally made
to the Ecuadorean state to private interests instead; or both.
The confrontation was set into motion by Ecuador long before the collapse in
the price of oil. Correa has been talking about this for a long time. It was
probably predicated on Ecuador's "windfall" hard-currency income from oil
exports allowing it to survive retaliatory measures by conducting many/most
foreign trade operations with cash or with the cooperation of friendly
countries (Venezuela, mainly, but also to some extent Argentina, and perhaps
even Brazil because it is competing with Venezuela). And while it is true
that speculation about the financial panic and a resulting world-wide
recession has led to a collapse in the price of crude, it is quite likely
that one of two conditions obtain:
First, Ecuador based its calculations on some cautious dollar sales figure
per barrel of oil based on 2007 prices, and even if current prices are a
little lower, the spike in oil prices earlier this year allowed Ecuador to
accumulate reserves so that the country has the dollars it needs to fight
this battle; or
Second, that Ecuador hedged its positions, like Mexico did (which in essence
locked-in a price of around $70/barrel through 2009, if I remember the
articles on this right). It amounts to the same thing as the first variant
though the mechanism is different.
Of course, an additional factor working in Ecuador's favor is the complete
disarray in world financial markets and the likely result that the capacity
of all imperialists to take concerted action against it in financial matters
will be limited or nil for some time. This is, frankly, only a small drop in
a sea of red ink that the banks are having to deal with. And the political
moment is such that the sorts of financial operators that speculate on the
debt of Third World countries (which is who holds Ecuador's debt now) aren't
likely to be able to muster much sympathy.
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