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Saturday, December 13, 2008

Ecuador Defaults: Iran Provides The Line Of Credit

More evidence of Iran's extending its tentacles into our hemisphere:
Ecuador's President Rafael Correa said yesterday that his nation is defaulting on its foreign debt, fulfilling his longtime populist pledge to leave international creditors in the lurch.

The default, Ecuador's second in 10 years, could rattle already jittery investors who have pulled billions of dollars out of emerging markets in recent months as the global financial crisis has spread. It could also set back U.S. interests in Latin America, as Correa now seeks to deepen financial ties with allies like Iran, which this week granted the South American nation a new $40 million credit line.

Yet some analysts say the impact of Ecuador's default may be relatively contained.
[...]

...Ecuador is ceasing payments not because the oil-rich country cannot afford to pay but because it has made a political decision not to....

[...]

It is exceedingly rare in global finance for a nation not to honor its debt because it doesn't want to, as opposed to not being able to make payments because of a financial crunch. Some analysts fear it may set a precedent, emboldening other leaders who share Correa's ideology -- such as Venezuela's Hugo Chávez -- to make similar pronouncements.

"That is the real concern," said Alessandra Alecci, senior analyst for Moody's Investors Service in New York. "At some point, do you see Argentina and Venezuela saying, 'Well, Ecuador did it, why can't we?' "...
Correa called having debt immoral. Applying a principle of shari'a finance?

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1 Comments:

Anonymous Anonymous said...

Iran crisis: Aging oil infrastructure could cripple its economy worldtribune.com

When the Iranians aren't investing in infrastructure then this could be a silver lining on a very dark cloud. It will make a strike against Iran all the more successful.

With oil at record lows . . .

Saturday, December 13, 2008 1:39:00 pm  

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