Ecuador Eyes New Financing After World’s First Virtual Debt Deal
Ecuador Eyes New Financing After World’s First Virtual Debt Deal
(Bloomberg) -- Ecuador is aiming to secure additional financing by the end of August to help plug its fiscal gap after wrapping up a deal to restructure $17.4 billion of debt, according to Finance Minister Richard Martinez.
President Lenin Moreno’s administration is negotiating a new program with the International Monetary Fund as well as some $2 billion in bilateral loans from China. Martinez said the Asian Infrastructure Investment Bank is also considering a $50 million loan to support small and medium enterprises.
“August is key,” Martinez said in an interview from Quito. “At the end of this month, we’ll have more clarity on how we’ll close the financing gap.”
On Monday, Ecuador won overwhelming support from bondholders to restructure its international notes, significantly reducing the nation’s obligations over the coming decade. Still, the state needs $4 billion in extra cash by year-end to fund a widening fiscal deficit amid the Covid-19 pandemic. Ecuador’s $4.2 billion pact with the IMF collapsed as the crisis worsened.
An IMF spokesperson declined to comment, while an official at the AIIB didn’t respond to a request for comment.
Martinez said his priority was to maintain a good relationship with foreign creditors while reducing the country’s debt service needs to support an economic recovery. The restructuring was the first in the world to have been done solely through online talks. Argentina reached its own accord a day later.
“We don’t know when Ecuador will return to the bond market, but we want investors to know we did this in good faith,” he said. “Maybe the next government will come back.”
In February 2021, Ecuador will convene the first round of its presidential vote. Moreno isn’t seeking reelection.
The South American nation adopted the U.S. dollar as its currency in 2000, meaning it is dependent on loans or a current account surplus to expand its economy.
Martinez said Ecuador must develop industries from avocados to medical marijuana and tourism to diversify the economy, while working to increase the productivity of traditional activities such as oil and mining that attract foreign direct investment.
The finance minister also reiterated his support for Mauricio Claver-Carone, a senior Trump administration official, in his candidacy for the presidency of the Inter-American Development Bank. The European Union’s proposal to postpone the IDB election until after the U.S. presidential vote would be a mistake, according to Martinez.
“We have to respect the process,” he said. “There’s a pandemic, an economic crisis and a social crisis across the region and countries that need the resources of the IDB. We don’t have time to lose.”
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