Brazil recalls Ecuador ambassador

by rahul | November 21, 2008 at 07:52 pm
101 views | 5 Recommendations | 4 comments

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Ecuador and Venezuela inaugurate joint oil field at Orinoco

Ecuador and Venezuela inaugurate joint oil field at Orinoco

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In reaction to the suspension of payments on a Brazilian loan worth at least $320 million and the filling of an international arbitration, Brazil decided to recall its Ambassador to Quito for further consultations. Ecuadorean President, Rafael Correa, stated Quito would not repay the Brazilian "illegitimate" debt. Even though some the following article justified such decision on  falling oil export revenues, this is not the first time Brazil deals have been questioned in Ecuador.  

  Brazil has recalled its ambassador from Ecuador over the Andean country's suspension of payments on a Brazilian loan worth at least $320 million.  Ecuador filed an international lawsuit on Thursday to suspend payments on the loan from Brazil's development bank, alleging the terms are unlawful. Rafael Correa, the Ecuadorean president, has warned the country may not repay "illegitimate" debt, as oil export revenues have been hurt by falling prices and the global financial crisis. Correa said the results of a year long audit of Ecuador's debt found indications that much of the country's $10 billion foreign debt could be illegitimate. Credit crunch:  Celso Amorim, the Brazilian foreign minister, has previously warned that if Ecuador defaults on a loan from the BNDES, as Brazil's national development bank is known, it would end bilateral trade between the two nations.  "Whoever knows diplomatic practices knows exactly what this [recall] means," Amorim said in Sao Paulo on Friday. "We have wide co-operation with Ecuador and we will examine this co-operation in light of these decisions."  Wall Street credit rating agencies have said Ecuador is among the least credit worthy countries in Latin America. The country defaulted on $5.8 billion in bonds in 1999, also amid a sharp fall in oil prices.

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Paschen

Thank you for the info Rahul, That is a substantial Amount of money and the circumstances are questionable at best.


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Luiz Castro

Brazil should never loan public money to LA countries, the Brazilian people is paying the price of Lula's populism. These populist "revolutionary" governments have no care for legal status, they are the law.

Good lesson for investors: Avoid the "revolutions".

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Paschen

You both make valid points here and I for one can not say either way for certain since more info is needed and a better over all picture to be drawn. Maybe this is a case where both are right to a point and may need an outside mediator to resolve this amicably.

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Luiz Castro

Thank you Paschen, unfortunately my view of the problem is a little different. In my opinion no Brazilian public money should ever be lended abroad. Brazil did and is getting the results now.

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