Ecuador’s President Rafael Correa, who defaulted on $3.2 billion of bonds and renegotiated foreign oil contracts, said the Andean nation has a “sincere interest” in attracting investors to help finance infrastructure, tourism and energy projects.
Correa, speaking at the Bloomberg Ecuador Summit in Quito, said Ecuador is the most stable politically since 1996, its economy is in “full recovery” from the global financial crisis and it’s ready to seek “responsible” private investment to help boost 2011 economic growth above the expected 5.1 percent. Ecuador is seeking $7.5 billion of private investment in infrastructure concessions over the next five years, Production Minister Nathalie Cely said in an interview today.
“We know perfectly well that Ecuador needs local and foreign investment to develop, but this must be done in a way so it benefits the country,” said Correa in an address at the summit. “We have an entire project portfolio, and we welcome private investment. Ask any foreign investor if he lost money here.”
Ecuador, which is rated two levels below Argentina and Belize by Moody’s Investors Service, is rebounding from its worst economic growth in a decade as oil nears $100 a barrel and agriculture and manufacturing expand.
Yields on Ecuador’s only international bond have declined to the lowest level since the debt default two years ago as the rally in crude, the nation’s biggest export, eases concern over the government’s 121 percent increase in public spending since 2006.
Correa, a 47-year-old former economics professor and ally of Venezuelan President Hugo Chavez, took office in 2007 promising to reduce poverty in a nation where about 40 percent of people can’t meet basic needs, according to the United Nations.
To that end, he renegotiated contracts with oil companies, including Spain’s Repsol YPF SA and Italy’s Eni SpA, to give the government better terms and halted mining exploration for almost two years.
After the default in December 2008, Correa called bondholders “true monsters who won’t hesitate to crush the country” and said he had “ rebelled against the system that established odious, unfair, illegal, immoral debts.”
Now, Ecuador has been approached and is listening to proposals from banks interested in helping the country sell debt again, Finance Minister Patricio Rivera said at the summit. In an Oct. 21 interview with Bloomberg Television, Correa said he is considering a debt sale in international markets.
‘Winds of Change’
The 2015 bond, the nation’s only outstanding international debt, is the highest returning bond among developing nations tracked in JPMorgan Chase & Co.’s EMBI - Global Diversified index.
In 2011, the 9.375 percent bonds due in 2015 have gained 6.5 cents on the dollar to 98.5 cents, reducing the yield by 1.77 percentage point to 9.77 percent, the lowest since August 2008.
“There have been winds of change and that always brings fear at the beginning,” Santiago Peralta, founder of Pacari Chocolates, said today when asked about the policies brought by Correa. “Socialism was the bogeyman, and now he’s gone. But there’s still a lot to be done.”
Correa has boosted infrastructure spending on highways, airports, and the nation’s energy grids to 8.7 percent of GDP from 3.2 percent in 2006 in an attempt to spur productivity, according to a government statement.
Ecuador will invest $4.7 billion in public works this year on items including the construction of a $1.68 billion, 1,500-megawatt dam in the country’s Amazon region, according to the Finance Ministry.
“You can perceive our sincere interest in bringing the economy closer to new investment and find the path to mutual benefit,” Correa said.
The government also is considering deepening the Manta port, on Ecuador’s Pacific coast, to 24 meters from 18 meters to better connect Latin America with Asian markets, Correa said.
Companies including Portec and Brazil’s Bertolini Group are studying concessions there, and Spanish investors are seeking airport cargo operating concessions, Cely said.
“Infrastructure investment is fundamental for our exports to be able to compete,” Cely said. “At least seven companies have shown interest in port and airport concessions.”
‘Open to Investment’
Public capital expenditures will represent 13 percent of gross domestic product this year, up from 12 percent last year, Correa said. Spending on social programs increased to 8.2 percent of gross domestic product last year from 4.7 percent in 2006, he said.
The percent of children studying and not working has climbed to about 86 percent last year from 77 percent in 2006, Correa said.
“Ecuador is a country open to investment, with clear and stable rules,” said Correa. “The investment we seek is responsible investment, committed to forming a partnership with our country and betting on long-term economic and social development. We have everything an investor looks for: an honest government, clear rules of play and extremely profitable projects.”