ECUADOR DEFAULTS
December 14th, 2008Via: Reuters:
President Rafael Correa declared a default on Ecuador’s foreign sovereign bonds on Friday, vowing to fight “monster” debt-holders in court in one of most aggressive moves against investors in the region for years.
Ecuador’s dollar-denominated debt prices plunged on news of its second default in a decade and the first in Latin America since Argentina in 2002, although the decision was not expected to lead to similar moves around the region.
Correa, a U.S.-trained economist and ally of Venezuela’s anti-U.S. President Hugo Chavez, refused to make a $31 million interest payment due on Monday on 2012 global bonds, saying the debt was contracted illegally by a previous administration.
“I gave the order not to pay the interest and to go into default,” Correa said. “We know very well who we are up against — real monsters.”
“If we have to face international litigation due to this, we will,” he added at a news conference in the OPEC nation’s largest city of Guayaquil.
“…saying the debt was contracted illegally by a previous administration.”
“When a despotic regime contracts a debt, not for the needs or in the interests of the state, but rather to strengthen itself, to suppress a popular insurrection, etc, this debt is odious for the people of the entire state. This debt does not bind the nation; it is a debt of the regime, a personal debt contracted by the ruler, and consequently it falls with the demise of the regime. The reason why these odious debts cannot attach to the territory of the state is that they do not fulfill one of the conditions determining the lawfulness of State debts, namely that State debts must be incurred, and the proceeds used, for the needs and in the interests of the State. Odious debts, contracted and utilised for purposes which, to the lenders’ knowledge, are contrary to the needs and the interests of the nation, are not binding on the nation – when it succeeds in overthrowing the government that contracted them – unless the debt is within the limits of real advantages that these debts might have afforded. The lenders have committed a hostile act against the people, they cannot expect a nation which has freed itself of a despotic regime to assume these odious debts, which are the personal debts of the ruler.”
http://en.wikipedia.org/wiki/Odious_debt