Tuesday, September 16, 2008

Will New Ecuadorian Finance Minister Backtrack on Debt?

In Ecuador, the resignation of Finance Minister Wilma Salgado and the appointment of Deputy Finance Minister Maria Elsa Viteri has international creditors pleased. Salgado, who often spoke out against the foreign debt, is resigning because of a controversy over projected budget numbers for 2009. Correa accused Financial Ministry bureaucrats of manipulating data to make the social programs required by the proposed constitution look too expensive.

But activists are worried about President Rafael Correa's commitment to renegotiating the country's over $16 billion in foreign debt, which activists by and large consider illegitimate.

Nonetheless, it appears that Ecuador's debt audit group will declare some debt illegitimate in an upcoming report. It is not clear how the myriad political and economic ideologies and interests within the Correa government will play out once the report is released. While he campaigned against the foreign debt, Correa has long said that he would pay it as long as the country could also afford to pay the social debt--increased funding for education and healthcare, etc. He has recently reiterated that position, but warned that falling oil prices could change the equation.

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