Ecuador Issues Costly Bonds that Could Sink It into Massive Debt
EspañolEcuador could face heavy debt in the future after issuing costly bonds for the third time this year.
Ecuador’s Ministry of Finance put US $750 million into the international market through the issuance of sovereign bonds with a term of 10 years and an interest of 9.65 percent.
Corporation of Studies for Development (Cordes) member José Hidalgo said that the bond issue will generate income for the country, but also that the money translates into new debt for the state.
Considering the interest of the bonds, he said the country will only have to pay the interest, US $72.4 million per year, until the capital is terminated.
“The bond issue is a new debt for the state and at the end of the term, the country will have paid nearly $724 million, not counting the $750 million of the capital,” added Hidalgo.
Economic analysts said Ecuador will have to pay about $1.47 billion by the end of the term.
“Ecuador has reached a point in which debt service (more capital interest) is unworkable for the next administration,” Cordes said in a statement. “The current government is kicking the problem forward.”
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This will be Ecuador’s third bond issue of 2016. In July, the first one was given in the amount of US $1 billion and with a maturity of six years and up to 10.75 percent interest.
The second was made in September under the same conditions. Officials claimed these resources will serve to finance the General Budget of 2016, most notably in public investment.
Minister of Finance Fausto Herrea offered the Ecuadorian bonds to the United States, with interest coming from several investors from Asia, Europe and North America.
Source: La República