April 23, 20 - 9:55 am - LABS

Ecuador postpones debt repayments as Latin American finances stretch thin

A sovereign debt crisis is a risk that hovers above Latin America while the region fights the coronavirus pandemic. Ecuador recently became the second Latin American country, after Argentina, to default on an upcoming bond payment, postponing $800 million until August.

According to the Financial Times, Ecuador has been struggling with its finances for months, and its crisis has been exacerbated by the coronavirus outbreak and the drop in oil prices.

Ecuador is one of the most severely hit countries in the region by the pandemic. Image: QB5 News Screenshot

Differently from the Argentine case, the vast majority of bondholders — between 82% and 91% depending on the bond in question — accepted the terms presented by the officials in Quito.

An international debate on developing countries public finances will be inevitable in the near future. As Alicia Bárcena, executive secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), recently pointed out:

The leaders of the G20 should be in favor of multilateral organizations making loans at favorable interest rates and alleviating the debt of countries that are highly indebted, deferring it or forgiving it. Exceptional measures are required to confront an unprecedented crisis.