Weekly Report - 19 November 2009 (WR-09-46)

ECUADOR | China loan. Ecuador has suspended negotiations with China for a US$1bn loan because the conditions it imposed were “unacceptable", the economic policy minister, Diego Borja, said. Borja gave no details, but he said Ecuador would not accept “impositions" from either China or the IMF. He said the decision would not leave Ecuador short of financing next year as the deal had not been included in the 2010 budget. He said Ecuador would seek financing from “friendly multilateral banks", as well as Russia. President Rafael Correa became the first Ecuadorean head of state to visit Russia last month.
The opposition has been arguing for some time that the government's dealings with China lack transparency and are detrimental for the country. In July, it struck an agreement with China for a US$1bn advance payment for 28% of the total value of oil Ecuador had agreed to export to China. Ecuador's export revenues fell sharply in the first half due to low oil prices. It needs alternative financing after a 'selective default' on foreign debt last year [WR-08-50]. On the plus side, the national tax agency is predicting that the tax take will increase by 12% in 2010 to US$7.3bn as a result of a tax reform clamping down on evasion.