LatinNews Daily Report - 06 July 2012

ECONOMY | Cash flow problems. Ecuador has secured a US$515m liquidity loan from the Bogotá-based Latin American Reserve Fund (Flar) in support of its forecast 9% increase in budget expenditure this year to US$26.1bn (roughly 36% of GDP). Falling oil prices hit Ecuador hard, as it depends on oil income for about 41% of total government revenues. The latest loan, which is the equivalent of 13% of Ecuador’s reserves, is the biggest of the three it has secured from the Flar since 2005. The three-year credit has an interest rate of 3.6%-4.0% over Libor. Private analysts forecast a 2012 budget deficit of 5.9% of GDP (roughly US$4.23bn). First-quarter growth was the slowest in two years, with real growth of just 0.7% quarter-on-quarter. In February President Rafael Correa said that his government was negotiating a new US$1.7bn loan with China. Correa is expected to seek re-election in February 2013.

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