February 23, 2008 / 7:36 PM / 11 years ago

Ecuador's Correa: Probe shows illegitimate debt

QUITO (Reuters) - Ecuadorean President Rafael Correa on Saturday said an ongoing government probe into the country’s foreign debt has unveiled “illegitimate” credits that he has vowed not to repay.

Correa, a leftist former economy minister, has pledged to stop payments of “illegitimate” debt or credits which he said were acquired under unfair terms by past corrupt administrations and that forced Ecuador to lower social spending.

But the U.S.-trained economist had until recently lowered his tone and refrained from halting debt payments. Last year he created a special commission of government officials and international experts to investigate any illegalities in foreign credits.

“Their (commission) findings are scandalous... we are not going to pay some of this illegitimate debt,” Correa said during his weekly radio address. “We are advancing in the investigation.”

Correa did not say what part of the debt is illegitimate or when the commission would finish its probe. But he added the investigation showed the country’s global bonds resulted from an earlier renegotiation of its Brady bonds that only protected the interests of bond-holders.

The Brady bonds were U.S.-backed paper created to help Latin American countries out of a debt crisis in the 1980s.

“They fixed everything for creditors not to lose any money and created the global bonds to replace the Brady bonds,” said Correa in reference to the country’s debt restructure after it defaulted on its credits in 1999.

Global bonds that are due in 2012, 2015 and 2030 amount to around $3.8 billion, according to the Finance Ministry data.

Finance Minister Fausto Ortiz earlier this week told Reuters the government has no plans restructure its foreign debt this year. Wall Street analyst have said Correa is unlikely fulfill his threats to default on some debt.

Reporting by Alonso Soto; editing by Vicki Allen

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