Ecuador says won't drop Brazil loan suit

QUITO, Nov 22 (Reuters) - Ecuadorean President Rafael Correa said on Saturday he will not quit an international suit to suspend a Brazilian loan repayment even if it frays diplomatic ties between the two countries.

Brazil recalled its ambassador from Quito on Friday after Ecuador filed suit in Paris to halt payments on a $320 million loan from Brazil's national development bank, or BNDES, over "illegalities" found in its contracting by a past government.

"Their measure hurt us deeply as I told President Lula da Silva. We respect it, but don't share it and we will not quit defending the interests of our country," Correa said during his weekly media address, referring to Brazilian President Luiz Inacio Lula da Silva.

"We have not suspended the payment, we have not thrown the contract on the trash, we are complying with the contract and started an arbitration claim."

Since he took office last year, Correa has kept good ties with Lula, who presides over Latin America's biggest economy, in an effort to push forward joint energy and infrastructure projects.

In September, Correa, a popular leftist, raised tensions with Brazil after he expelled top constructor Odebrecht over a dam dispute. Correa said the BNDES loan was linked to the Brazilian constructor that failed to properly built the dam.

Correa has raised the specter of default by threatening not to repay billions of dollar of "illegal" debt or loans riddled with irregularities when they were contracted. A government-appointed audit panel found illegalities in much of the country's $10 billion foreign debt.

The U.S.-trained economist has said his government will act responsibly on the debt front, but has not ruled out more suits or an outright default of "illegal" loans. (Reporting by Alonso Soto; editing by Mohammad Zargham)