Ecuador Seeks to Renew $1.5 Billion China Credit LineNathan Gill
Ecuador, the OPEC nation that uses most of its oil output to pay off loans from China, is seeking to renew a $1.5 billion credit line with the Asian country to help finance next year’s budget.
Finance Minister Fausto Herrera met with officials from China Development Bank Corp. on Aug. 22 in Quito to review investment projects financed by the bank and discuss the renewal of the credit line, the South American nation’s Finance Ministry said today in an e-mailed statement. The funds would be used to help pay for budgeted public works projects in 2015, according to the statement. The ministry didn’t provide more details about the credit line.
Ecuador, faced with the highest borrowing costs in South America after Venezuela and Argentina, has relied on Chinese lending to help cover swelling budget deficits since defaulting on $3.2 billion of its foreign debt almost six years ago. The loans from China have helped Ecuador boost spending on infrastructure projects, including a series of hydroelectric dams that will help the nation reduce subsidies on imported fuel used to generate electricity, according to the statement.
“We are continuing to work to broaden our financial relationship,” Herrera said, according to the statement. “With the help of China, Ecuador has been able to push forward with necessary projects in strategic sectors that have been delayed for decades.”
The credit line would be on top of a $2 billion loan signed in May with Unipec Asia Co., a unit of China Petroleum and Chemical Corp., known as Sinopec. That deal was guaranteed by oil from state-run PetroEcuador over an unspecified timeframe. The government hasn’t released details of that operation.
In June, the government sold international bonds for the first time since the default, tapping investors for $2 billion or almost triple the amount originally planned, according to Finance Ministry data.
The yield on those bonds, due in 2024, was unchanged at 7.25 percent as of 1:55 p.m. New York time, according to data compiled by Bloomberg. The extra yield investors demand to own Ecuadorean bonds instead of U.S. Treasuries was unchanged at 4.75 percentage points, according to JPMorgan Chase & Co.’s EMBIG index.
Ecuador produced an average 555,300 barrels of crude per day in June, according to the most recent data from the country’s central bank. About 70 percent of that goes to pay off loans from China, Ramiro Aguilar, a legislator and member of the congressional economic commission, said in a July interview with Bloomberg News.