- Deal may close after impeachment bid fails, Finance Chief says
- Ecuador selloff opens the opportunity to buy back bonds
According to Bloomberg article published on April 13, 2023, Ecuador is in talks with the International Monetary Fund for a credit line of as much as $1 billion after the nation was hit by an earthquake, flooding and a landslide in recent weeks.
The government has its financing needs covered for the year, but is seeking additional support to fund disaster relief after the series of natural calamities, Finance Minister Pablo Arosemena said Wednesday, in an interview in Washington D.C.
“We don’t need the money right this second,” Arosemena said. “We don’t have money or resources to spare, but we’re up to date with our obligations.”
The Andean nation is located in a region of intense seismic activity, and is also vulnerable to volcanic eruptions and extreme weather. Parts of the country have been affected by La Nina and El Nino weather events this year, Arosemena said.
In December, Ecuador received a final disbursement of about $700 million of its $6.5 billion extended fund facility with the IMF.
Politics, Buyback
Arosemena is meeting money managers this week for the first time since President Guillermo Lasso’s crushing referendum defeat in February sent Ecuador’s bonds into a tailspin.
Weeks later, a second impeachment attempt sent some of the nation’s notes trading at record lows, below 30 cents on the dollar, according to data compiled by Bloomberg. Some investors fear that Lasso’s unpopularity may allow the socialist allies of former President Rafael Correa to regain power.
The opposition-controlled Congress is trying to oust Lasso over graft allegations, which he denies. It could take at least six weeks before lawmakers can vote on the impeachment, which needs the approval of two-thirds of Congress.
Once impeachment proceedings finish, the government should be able to close the deal with the IMF, according to Arosemena. He said he expects the impeachment bid to fail.
Debt from the country, which has a reputation as a serial defaulter, has handed investors losses of over 26% so far this year, the worst in the world after Bolivia, according to a Bloomberg index. The bond selloff opens an opportunity to carry out the debt buyback first announced late last year, Arosemena said.
“There’s this paradox of the country risk jumping on the uncertainty, the expectation that an irresponsible government could come back,” he said. “But on the flip side of the coin, it generates an opportunity for good liability management.”
