Ecuador Strongly Hints at Bond Default

Ecuador has taken the stance that it doesn’t matter if it defaults Tuesday on $96 million in deferred Brady bond interest, as payment wouldn’t alleviate the country’s swollen foreign debt--the largest in Latin America.

Finance Minister Alfredo Arizaga said late Thursday that the government has completed a “menu of options” for restructuring $5.9 billion in Brady bonds and is prepared to sit down with bondholders to negotiate an easing of its external debt.

“I want to be emphatic,” Arizaga told reporters. “It doesn’t make any difference to bondholders or the country if we pay or do not make this payment. The problem of the external debt would not be solved.”

Arizaga’s statements are the closest Ecuador has come to saying it won’t pay its August bond coupon.

Ecuador, faced with its worst economic crisis in 70 years and Latin America’s heaviest per-capita debt load, is poised to make history by becoming the first country ever to default on its Brady bonds, which are backed by U.S. Treasuries.

Ecuador’s economic woes sent emerging bond and currency markets tumbling last month when it announced it would defer for 30 days August coupon payments and would seek to restructure its Brady debt.