Ecuador will go into debt again with bond issuance in 2022

Ecuador will go into debt again with bond issuance in 2022

Although it is expected to receive several disbursements from multilaterals, during the first quarter of 2022 bonds will be reissued to finance public spending.

This December 14, 2021, President Guillermo Lasso announced that Ecuador will reissue bonds in international markets during the first quarter of 2022.

In other words, the country will reactivate this mechanism of financing, despite the fact that in the first months of next year it will receive several disbursements from multilateral organizations and will begin to receive additional income as a result of the tax reform.

The President assured that excellent relations are maintained with the International Monetary Fund (IMF), and that a disbursement of $ 700 million will be received in January.

Relationships are very good. In December a technical commission came and we hope that in January 2022 the approval of the next disbursement by the IMF board will take place, “he said.

Likewise, Lasso assured that, after a “very constructive and purposeful conversation” with the World Bank, $ 700 million of new credit will also arrive.

For its part, the Inter-American Development Bank (IDB) will receive $ 500 million; and from the Andean Development Corporation, a disbursement of $ 200 million will be added.

In total, in the first months of 2022, the fiscal coffers will have additional resources for $ 2.1 billion. However, that will not be enough to cover spending needs.

For this reason, Lasso stressed that it will once again enter the market for bonds international markets in order to get more “liquidity and resources”.

The destination of these resources, according to the President, will be the financing of social works and especially investments in the field of infrastructure.

If at this time Ecuador went out to broadcast bonds, the interest rate that you would have to pay would exceed 10%. This rate is expensive compared to the 3% to 4% that can be obtained from the multilaterals.

For the cost to fall until the first quarter of 2022, there would have to be a significant reduction in the risk country. This index, which measures the risk that an economy cannot pay its debts, currently stands at 843 points.

According to Lasso, it has not been possible to improve this index, after a significant drop in response in February 2021, because it depends on several factors, which are not always in the hands of the national authorities.

“The risk country it depends on many elements. It depends on internal elements of Ecuador, which are in our hands, such as the agreement with the IMF, the tax reform and other decisions to strengthen confidence. But the volatility of the price of oil, the enormous global inflation and the liquidity cuts that the central banks of other countries like the United States are making are also playing a role, “he said.

Oil production causes headaches

The problems of regressive erosion in the tributaries of the Ríos Quijos have caused the suspension of the pumping of raw in the Trans-Ecuadorian Pipeline (SOTE) and the Heavy Crude Oil Pipeline (OCP).

According to the Minister of Energy, this suspension has forced wells and fields to be paralyzed, so that currently the production of barrels of raw it is only 45% of normal.

President Lasso acknowledged that this is an economic blow that prevents trading all the raw that was planned. However, he said he expects a new variant for the SOTE to be built in 17 days.

“This delays the plans to increase production that we had, but they will resume stronger from 2022,” he concluded.

This delay in plans could reduce oil revenues by the end of 2021, and even the beginning of 2022. This would also be a factor so that the oil does not fall further. risk country. (JS)

DATA.- Ecuador stopped broadcasting bonds in international markets since mid-2020, when it renegotiated the more than $ 17,000 million of previous debts that it has with this type of financial instruments.


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