Ecuador will announce a decision on December 15, 2008 regarding debt payment on approximately $3.8 billion in foreign debt. This comes after a 30-day grace period in which debt payments were suspended based on serious irregularities in the country’s debt history detailed in a 172-page final report by an independent Public Credit Audit Commission. If Ecuador defaults, it will be the first Latin America country to do so since Argentina in 2002.
Ecuador’s situation points to an important blind spot in discussions of global policies to combat the current financial crisis caused by irresponsible lending, among other factors: the regulatory vacuum in terms of an international, independent mechanism for countries to question potentially illegitimate and/or illegal debt. This vacuum essentially forces a country such as Ecuador into a corner with two possible options: restructuring or default. While Ecuador is the first developing country during the current crisis to consider default, it is unlikely to be the last given the severity of the global recession.
With: Neil Watkins, Executive Director, Jubilee USA Network Mark Weisbrot, Co-Director, Center for Economic and Policy Research