President Guillermo Lasso announces debt renegotiations with China in New York | Economy | News

The President of the Republic, Guillermo Lasso, announced today that Ecuador has reached debt restructuring agreements with the China Development Bank in the amount of 1,395 million dollars and with the Export-Import Bank of China (China Eximbank) for 1,832 million dollars.

According to the announcement, the Republic of Ecuador achieved:

1. Smooth your repayment history with a 3-year extension of the maturity date of all outstanding instruments.

2. Lower the current interest rate.

3. Suspend all repayments from China Eximbank’s business lines for 6 months (“payment period”).

4. Balance the profile of oil exports to CNPC (Petrochina) under oil guaranteed contracts.

The Office of Government Communications (Segcom) said that overall, these agreements include relief of $1,400 million in debt burden for the Republic until 2025, as amortization to the China Development Bank will be reduced by more than $745 million over the next three years (2022-2024). and write-offs to Eximbank will decrease by about $680 million over the next four years (2022-2025).

The maturities resulting from these agreements extend to 2027 in the case of the China Development Bank and 2032 in the case of Eximbank, enabling cash flow relief to support the government’s priorities.

The Minister of Economy and Finance, Pablo Arosemena, indicated that “the idea is to release part of the oil and allow it to be sold at market prices, which is an additional benefit for the Republic of Ecuador.” And with those resources, the president can further strengthen social investment.”

Earlier, in the morning, the The Wall Street Journal of New York said a restructuring of $4.4 billion of Ecuador’s outstanding debt to China had been reached. and that it will save the country $1 billion between 2022 and 2025.

“This is great progress for Ecuador,” President Lasso told that media outlet, on Monday the 19th, adding that the deal had been completed a week earlier.

The president is in New York to participate in meetings at the United Nations General Assembly. Ecuador had been seeking deals with China since February when Lasso traveled to Beijing and met with President Xi Jinping.

The president also said that Ecuador is going further in trade talks with China and plans to reach an agreement at the China-LAC trade conference in December. “There we hope to announce a free trade agreement,” Lasso said.

In accordance with Alberto Acosta Burneo, editor Weekly analysis, The country had to renegotiate the debt, as in these months and in 2023 the government had to make important debt repayments with China. These payments, under the current circumstances, could have been impracticable, so it was important to reach an agreement.

For Acosta Burneo, President Lasso’s statement would not be related to a reduction in equity, but rather an extension of the terms to pay debts.

According to figures from the debenture the Ministry of Economy and Finance, Ecuador has maturity dates with two Chinese banks: Bank of China and Eximbank of China, for about 720 million dollars.

Acosta explained that the financing activity with China is divided into two parts: one is financial and the other is oil.

On the subject of raw materials, Petroecuador announced a few days ago that there would be a renegotiation contracts had meant a redistribution of the delivery of cargo that has already been committed for a longer period (until 2027). However, a new contract was also signed for 20 months and with a market price, and finally oil was released on the site.

For Acosta, this benefits the country because it has the potential to put more oil at market prices and thus revalue it.

The possibility of renegotiation with China, according to Acosta, also opens the door to the possibility of a new debt agreement with that country.

In fact, the government said that these agreements show the strength of cooperation between China Development Bank, ChinaEximbank and the Republic of Ecuador and they lay the foundation for future cooperation with Chinese credit institutions.

We have to take into account, he said, that this year ends andthe agreement with the International Monetary Fund, and that in view of the fact that it is impossible to enter the market due to high country risk, government, would suggest this possibility.

He explained that financing options are scarce and even though the Treasury has said the house is in order, it continues to spend more than it earns.

He assured that the International Monetary Fund probably knew that at the end of 2022 the deficit would continue, but he believed that Ecuador could exit the market.

It didn’t count on the October uprising that fueled the national risk. Currently, this indicator stands at 1,446 points, about 600 points more than when President Lasso took office.

While, former Minister of Energy, Fernando Santos Alvite, He assured that it is still necessary to clarify what problems arose during the renegotiation of the oil contracts. He indicated that it was not clear what happened since the day the new contracts were to be signed Director of Foreign Trade, Pablo Noboa. “There should be an explanation,” he said.

According to WSJEcuador borrowed about $18 billion from China, mostly during the administration of former president Rafael Correa, “a leftist who was often critical of US foreign policy and tried to strengthen ties with Beijing during his government from 2007 to 2017.”

Then Correa’s departure, reports WSJ, Chinese funding has come under increased scrutiny in Ecuador. It is that the contracts with China have been in the eye of the hurricane when it was known that they had formulas that led to a loss for the state of 3.6 dollars per barrel. Thus, long-term agreements with China and related debt have been described by President Lasso as harmful to Ecuador.

Oil backed loans tied up almost all of the country’s oil sales for several years and almost cost the country $5 billion in lost revenue, according to the Congressional Oversight Committee.

President Lasso said Ecuador is seeking foreign investment in Ecuador, in sectors such as energy, infrastructure and oil, to boost growth and help the country overcome challenges in the global economy, such as rising food and energy prices. “We believe that if we focus on a process that causes an ‘investment shock’ in the country, it can overcome the difficult times now,” he said.

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