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Ecuador debt markets suffer after resignation
Financial Times
July 08, 2008

By Naomi Mapstone

Ecuadorian debt markets suffered sharp losses on Tuesday following the resignation of Fausto Ortiz, finance minister, and a government raid on two television stations in Quito, the capital.

The country's benchmark bonds suffered the biggest one-day falls of the year and the key 2015 bond fell 3 per cent on concerns that Mr Ortiz's departure could open the way for a restructuring of Ecuador's external debt.

But analysts cautioned that the government was unlikely to make any immediate moves. "Ecuador's ability and willingness to meet its debt obligations is contingent on their financing position. And over the near-term they are swimming in cash," said Patrick Esteruelas, Latin America analyst at Eurasia Group.

Mr Ortiz, one of the most orthodox members of Rafael Correa's leftist administration, will be replaced by Wil ma Salgado, deputy of the Socialist party in the Andean parliament, who has pledged to prioritise social spending over debt payments.

Mr Ortiz resigned during a late-night meeting in which the government decided to seize control of the television stations, which are among 195 companies the government says have links to bankers implicated in banking collapses in the late 1990s. It was not immediately clear whether he resigned over the move on the television stations.

Police and agents from the state deposit guarantee agency, which oversees efforts to recover funds of depositors lost in the banking crisis, took over Gamavision in Quito, and TC Television in Quito and Guayaquil in an early-morning raid. A Gamavision anchorwoman reported the takeover before being taken off air.

The owners of the stations are related to William and Roberto Isaias Dassum, former bankers charged with embezzlement over the collapse of Filanbanco bank. The stations deny they have any business connection with the Isaias Dassum brothers.

"Ecuador's ability and willingess to meet its debt obligations is contingent on their financing position. And over the near-term they are swimming in cash," said Mr Esteruelas.