Sunday, November 26, 2006

Ecuadorian Presidential Candidate Plans to Cut Ties with World Bank and IMF

Source: Ecuador's Correa vows to slash World Bank, IMF ties

Ecuadorean presidential candidate Rafael Correa announced that if elected, he plans to buy back and restructure the country's debt with multilateral organizations, including the World Bank and International Monetary Fund (IMF). Correa told foreign reports that “with the extra oil revenues, we have the capacity to buy back our debt with the IMF. But I insist, I would even be willing to issue more expensive debt to pay off the IMF because it has done us so much harm.”

His plan is fueled by his goal “to minimize ‘harmful’ ties” with the organization. In order to do this, Correa says he will seek “an extension of maturities so we [Ecuador] can pay them until the last cent.” Correa also promised that if elected he plans to renegotiate oil contracts to significantly increase the amount of crude Ecuador receives from private oil companies.

Correa’s competition for presidency is Alvaro Noboa, the country's richest man, who is currently leading, according to recent polls. Noboa has hinted that he plans to swap more expensive debt for cheaper bonds at better terms, but he has not given many more details on his debt policy.

1. Correa’s promises to restructure Ecuador’s foreign debt and boost social spending to aid the country’s poor majority have rattled Wall Street. What global effects can you foresee if Correa wins the presidency and follows through with his plans?

2. What concerns the United States and other global financial leaders regarding Correa’s plans to sever ties with the World Bank and the IMF? How much of an impact would this have on these institutions?

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