Keep Us Strong WikiLeaks logo

Currently released so far... 64621 / 251,287

Articles

Browse latest releases

Browse by creation date

Browse by origin

A B C D F G H I J K L M N O P Q R S T U V W Y Z

Browse by tag

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Browse by classification

Community resources

courage is contagious

Viewing cable 09QUITO351, ECUADOR ECON UPDATE: BOND REPURCHASE; FINANCIAL LIQUIDITY

If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs
Reference ID Created Released Classification Origin
09QUITO351 2009-05-15 16:23 2011-05-02 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Quito
VZCZCXYZ0007
RR RUEHWEB

DE RUEHQT #0351 1351623
ZNR UUUUU ZZH
R 151623Z MAY 09
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC 0373
INFO RUEHBO/AMEMBASSY BOGOTA 8140
RUEHCV/AMEMBASSY CARACAS 3544
RUEHLP/AMEMBASSY LA PAZ MAY LIMA 3198
RUEHGL/AMCONSUL GUAYAQUIL 4320
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS QUITO 000351 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV ETRD EC
SUBJECT: ECUADOR ECON UPDATE: BOND REPURCHASE; FINANCIAL LIQUIDITY 
MEASURES; NOBOA'S TAX DEBT 
 
REFTEL A: QUITO 277 
       B: QUITO 220 
 
1.  (U) The following is a periodic economic update for Ecuador that 
reports notable developments that are not reported by individual 
cables. 
 
Reactions to Government Repurchase Proposal 
------------------------------------------- 
 
2.  (U) On May 1, a group reportedly representing bondholders 
holding 25% of outstanding Global 2012 bonds (of a total issuance of 
$510 million) notified the Ecuadorian government that it intended to 
accelerate principal repayment.  Twenty-five percent is the 
contractual threshold to call for accelerated payment following a 
default, which would make the outstanding principal and interest 
payments due immediately. 
 
3.  (U) Following the announcement of legal action, Finance Minister 
Viteri held a conference call with bondholders on May 5.  She stated 
that Ecuador has financing available to repurchase the outstanding 
2012 and 2030 bonds under the modified Dutch auction proposal that 
it announced on April 20 (reftel a).  She also stated that Ecuador 
might pay a higher final clearing price than the 30% floor price set 
by the GOE.   The deadline for bondholders to accept the GOE's 
modified Dutch action proposal is May 15, and final results of the 
auction will be announced on May 26. 
 
Government Measures to Improve Liquidity 
---------------------------------------- 
 
4.  (U) Since November 2008, deposits in the banking system have 
declined markedly.  Deposits are down 5.6% or USD 705 million as of 
early May (in contrast to previous years when deposits were growing 
at 20% per year).  This is largely the result of decreased dollar 
income because of low oil prices, falling remittances, and weakening 
non-petroleum exports (reftel b).  The Ecuadorian government 
announced several measures to improve financial sector liquidity. 
One measure, already announced in March 2009, is for the Ecuadorian 
Social Security Institute (IESS) to buy up to $500 million in 
mortgages issued by private banks.  Additional measures to improve 
liquidity include:  i) public institutions would refrain from 
withdrawing their deposits from private banks; ii) a possible 
increase of IESS deposits in private banks, which now account for 
$730 million or 5 percent of bank deposits; and iii) the GOE could 
provide "indirect" support to help financial institutions obtain 
external financing through regional international financial 
institutions.  In addition, public institutions would accept lower 
interest rates on their deposits in private banks (up to 4 percent), 
to help private banks maintain their profit margins. 
 
5.  (SBU) However, the GOE is considering other actions that could 
reduce liquidity for some institutions.  For example, although 
public institutions are not to withdraw their deposits from private 
banks, Coordinating Minister for Economic Policy Diego Borja 
threatened to withdraw public sector resources if banks are 
reluctant to grant credit.  In addition, President Correa has 
presented a bill to reform the Reserve Fund Law, which would drain 
companies' liquidity by forcing them to pay on a monthly basis 
employee benefits that were previously paid out every three years. 
 
Banana Magnate Owes Millions in Back Taxes 
------------------------------------------ 
 
6.  (U) The Ecuadorian tax service (SRI) announced recently that 
Exportadora Bananera Noboa, a banana export company owned by magnate 
and four-time presidential candidate Alvaro Noboa, owed around $59 
million in outstanding taxes from 2005.  The head of the SRI also 
said that the SRI will carry out additional audits on the company 
for 2006, 2007 and 2008. 
 
HODGES