Ecuador to Use China Loan to Help Finance its Budget

Ecuador, home to South America’s third-largest oil reserves, will finance its 2013 budget deficit with a $2 billion loan from China, Finance Minister Patricio Rivera said today.

The government will use the loan to help cover financing needs of $6 billion next year, Rivera said today in a joint news conference with President Rafael Correa in Quito.

Correa has relied on windfall oil profits and loans from China to help finance spending since Ecuador’s $3.2 billion bond default in 2008 and 2009 locked the nation out of global credit markets. As oil prices rose this year to an average $95.69 per barrel, about $16 more than forecast in Ecuador’s 2012 budget, the country scrapped a planned bond sale and put a previously announced $1.7 billion credit line from China on hold.

“We already had an agreement with the People’s Republic of China for a payment that we haven’t had to use this year,” Rivera said at the presidential palace in Quito. “Originally, it was $1.7 billion. They raised it a little in the negotiation process and now it’s $2 billion.”

Ecuador will use loans tied to specific public works projects from regional multilateral lenders to cover the majority of its 2013 financing needs, Rivera said, without providing more details.

(Corrects to say financing needs in second paragraph of story first published Dec. 12.)
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