Ecuadorean President Rafael Correa Announces Default on Debt

Leftist President Rafael Correa announced recently that he would not take strides to repay the 30.6 billion dollars still owed on Ecuador's Global 2012 bond. Saying the debt was illegitimate, Correa confirmed that the amount would remain unpaid and stood behind a presidential commission that recommended Ecuador default on almost 40 per cent of foreign debt.

Apparently, the refusal to pay has nothing to do with the actual economic inability, but rather ideological reasons. "We know very well who we are up against—real monsters," President Correa declared to Al Jazeera America. Correa had repeatedly threatened a default to prioritize social spending in the country, accusing former government officials and bankers (the "real monsters" of his reference) of profiting from the bonds.

Correa plans on taking the case to court on the grounds that the billions of dollars in foreign debt negotiated by previous leaders of Ecuador should be null and void since they were authorized without executive decree.

Investors and bondholders now fear that the ideological premise that Correa is using as justification to default on the loans, essentially that that Ecuador's borrowings from international lenders are tainted by corruption and are thus immoral and illegal, may gather momentum among other left-leaning Latin American nations in 2009. International investors are sure to be keeping a careful eye on Bolivia, Nicaragua and Venezuela in the months to come.