By Claudia Assis Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Ecuador will probably have to look inward to meet its financing needs now that the government has chosen to default on its foreign debt, as money from multilaterals and friendly countries may prove hard to come by.
The leftist government of President Rafael Correa - now firmly shut out of commercial credit - may set its eyes on domestic "liquidity pools" with local banks and the country's social security agency.
The Andean country could also resort to its foreign reserves of about $4 billion, which are up from about $1 billion last year as oil prices kept rising up until mid-July.
Multilateral lenders, however, may turn off the taps following the default, market participants said.
Goldman Sachs senior economist Alberto Ramos said he would be surprised if the board of the Inter-American Development Bank lends Ecuador any more money.
In a report analyzing its overseas debt, Ecuador also criticized multilateral lending and questioned its legitimacy, using the same rhetoric it employed in questioning commercial lending.
Both the International Monetary Fund and the Inter-American Development Bank declined to comment on Ecuador, while officials at the Andean Development Corp., or CAF, didn't return phone calls Monday.
The IDB alone had $1.46 billion in outstanding loans to Ecuador at the end of last year.
The Ecuadorean government-sponsored debt audit commission's report had explicitly tagged two Global bond issues as "illegitimate" and even "illegal," lending support to Correa's decision Friday to default on a bond payment.
Correa, a former finance minister who had criticized the external public debt load even before his election, may now be banking on a helping hand from allies in other countries such as Venezuela and Iran, which he visited earlier this month. But with crude oil prices down dramatically from their July highs, those two countries may not be forthcoming.
"I don't think any of the friends have any money," said ABN-Amro debt analyst Siobhan Morden. Venezuela has its own financing issues, she said.
Plunging oil prices have been a financial headache for Venezuela. Sweet, light crude oil prices in New York have fallen from a high of nearly $150 a barrel in July to $45 a barrel Monday.
As for multilateral money, even if it is forthcoming, it usually comes with strings attached, Morden said. Friday's default just cemented what was already painfully obvious - that Ecuador was not going to get access to overseas money anyway, due to the noise it had been making about the alleged illegality of its debt.
Without access to external capital, the country will become more vulnerable to cyclical economic downturns, Morden said.
And investors are looking even less kindly on Ecuador, since the decision to default was a political one - the country has the money to meet its obligations. It was Ecuador's second default in less than a decade.
In a report Monday, UBS said the effects of the default could be "severe," especially as Ecuador is already suffering from declining oil prices and lower remittances from workers overseas amid the global economic slowdown.
"Though banks' balance sheets are not directly affected by this decision - they essentially have no exposure to government bonds - the risk of a deposit run in the current context of heightened uncertainties, we think, has increased," UBS said.
Ecuador's recently passed banking law created a liquidity fund that the government wants to bring up to $1.2 billion in the next three years, using resources from private banks.
The fund was ostensibly created to cushion any liquidity problems within the banking system, but most members of the committee holding the keys to the coffers are appointed by the government, and nothing in the law prevents the money from being used for other purposes.
The law also erases some restrictions that Ecuador's social security agency had in investing its money, leaving the door open for a request from the government that money be invested in domestic bonds.
According to Ecuadorean government sources, the finance minister is considering the possibility of issuing up to $1.2 billion in domestic bonds, and the social security agency's director has said it could invest in government bonds.
In late afternoon in New York, Ecuador's risk premium on the widely tracked JPMorgan Emerging Markets Bond Index Global Diversified was 58 basis points tighter at 3866 basis points over U.S. Treasurys. Returns were a negative 20.94%.
The broader risk premium on JPMorgan's EMBIGD was flat at 788 basis points over Treasurys. Returns were a negative 0.49%.
-By Claudia Assis, Dow Jones Newswires; 201 938 4385; claudia.assis@dowjones.com
(Mercedes Alvaro in Quito contributed to this article.)
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Publié le 15 Décembre 2008 Copyright © 2008 Dowjones