Ecuador to tap China banks for new financing

Monday, December 1, 2014

The Ecuadoran government is looking to sign new financing agreements with Chinese banks next year.

President Rafael Correa is due to visit China in January with finance minister Fausto Herrera, who plans to sign financing deals that have already been agreed upon as well as secure new ones, the finance ministry said in a release.

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The financing from China will help the Ecuadoran government to stick to its fiscal plan for the coming years and to reach a fiscal equilibrium in 2018.

The Andean nation has been running a fiscal deficit for several years mainly because of an ambitious public investment program – and the government expects next year's fiscal deficit to be around US$5bn.

Ecuador is one of the countries in Latin America and the Caribbean that have obtained most financing from China over the last several years.

During 2009-13, Ecuador received US$9.9bn in financing from China of which the majority went to the energy sector.

In December 2012, the Ecuadoran government obtained US$2bn from the China Development Bank to finance part of the 2013 budget deficit.

Since defaulting on two global bonds in 2008 the Ecuadoran government had relied heavily on the Asian country as well as multilateral lenders CAF and IDB for its foreign financing.

Ecuador made its comeback to the international bond markets in June with a 10-year issue worth US$2bn and is expected to sell global bonds again in 2015.

The Ecuadoran economy grew 4.5% last year and is forecast by the IMF to slow to 4% both this year and 2015 because of lower oil prices and higher interest rates in the US.