* Moody's cites capacity to secure internal financing
* China has become Ecuador's main lender in recent years
* Country forecast to grow 4.8 pct in 2012
(Adds details, background)
By Luciana Lopez and Eduardo Garcia
NEW YORK/QUITO, Sept 13 Moody's Investors
Service on Thursday raised Ecuador's long-term government bond
rating to Caa1 from Caa2 with a stable outlook, keeping the
default-prone Andean country deep in junk bond territory but
noting its improved ability to find financing.
About half of sovereigns rated Caa1 end up defaulting, as
OPEC-member Ecuador did in the late 1990s and 2008.
Its new rating is in line with the ones Moody's gives to
Pakistan and Cuba. Neighboring Colombia has meanwhile joined
other Latin American countries such as Peru, Brazil and Chile as
a high-, or investment-grade, credit.
Moody's based the upgrade in part on "the government's
capacity to secure access to new external financing (e.g.,
China) in the wake of its 2008 default," the agency said.
"The rating outlook remains stable to reflect a balance
between key credit strengths and challenges for Ecuador's credit
profile," it said in a statement.
The upgrade by Moody's was the second for the OPEC-member
country so far this year. The good health of the economy led
Standard & Poor's to upgrade Ecuador's long-term sovereign debt
rating to B from B-minus in early June.
Fitch rates the country B-minus, also with a stable outlook.
Ecuador locked itself out of debt markets by defaulting on
$3.2 billion in global bonds nearly four years ago, but Moody's
noted that the country has continued to service all of its debt
Following the default Ecuador has met its funding needs with
bilateral credit deals, mostly from China.
Last year, the government signed a $2 billion credit deal
with China and a pact for a $571 million loan with a Chinese
bank. In November, President Rafael Correa said his government
was in talks with a Chinese bank for a loan worth $1.7 billion.
Ecuador also secured a loan worth $515 million in July from
the Latin American Reserve Fund to prop up its balance of
payments amid lower oil export revenues.
The central bank lowered its 2012 growth forecast to 4.8
percent from 5.4 percent previously after posting slower
than-expected growth in the first quarter, in part due to lower
oil revenues. However, the prices paid for Ecuadorean crude have
picked up in recent weeks.
OIL REVENUES, CONSTRUCTION
The Correa government has failed to diversify its economy
away from its dependence on oil exports and the country could
suffer badly if crude prices fall again.
Higher oil export revenues together with increased tax
collection have allowed the government to ramp up spending on
welfare and infrastructure in recent years, which has had a
positive effect on economic growth.
Ecuador's economy grew 7.8 percent in 2011, more than double
the 2010 growth rate. The economy expanded 3.6 percent in 2010
and 0.4 percent in 2009.
The government has vowed to continue spending heavily to
spur growth as it heads toward a presidential election scheduled
for February 2013. Correa is expected to run for re-election,
but has yet to make an official announcement.
Finance minister Patricio Rivera told Reuters last month
that he sees more than 4 percent growth in 2013 and that the
expansion will be driven by the construction
(Additional reporting by Tiziana Barghini in New York and Hugh
Bronstein in Caracas)