13 Dec 2008

Ecuador defaults on foreign debt

12:57 pm on 13 December 2008

Ecuador has defaulted on its foreign debt.

It is the second default by Ecuador in a decade and the first in Latin America since Argentina in 2002.

President Rafael Correa refused to make an interest payment of $US31 million due on Monday on 2012 global bonds, saying the debt was contracted illegally by a previous administration.

Mr Correa is an ally of Venezuelan President Hugo Chavez. His political slogan is "life before debt".

Ecuador's total debt is approximately $US10 billion - about 20% of gross domestic product. About $US3.8 billion of the debt is in bonds.

At a news conference in Guayaquil, Mr Correa said on Friday he will offer a restructuring deal to bond-holders.

Ecuador has received record income from oil exports this year and has enough funds to make the payment.

Elections are due in April 2009.