This Is How You Do It! Ecuador Declares Foreign Debt Illegal and Illegitimate

[Orwellian_Ghost]

Amidst the spreading global financial crisis, a special debt audit commission released a report charging that much of Ecuador's foreign debt was illegitimate or illegal. The commission recommended that Ecuador default on $3.9 billion in foreign commercial debts--Global Bonds 2012, 2015 and 2030--the result of debts restructured in 2000 after the country's 1999 default.

Although Ecuador currently has the capacity to pay, dropping oil prices and squeezed credit markets are putting President Rafael Correa's plans to boost spending on education and health care in jeopardy. Correa has pledged to prioritize the "social debt" over debt to foreign creditors.

The commission accused Salomon Smith Barney, now part of Citigroup Inc., of handling the 2000 restructuring without Ecuador's authorization, leading to the application of 10 and 12 percent interest rates. The commission evaluated all commercial, multilateral, government-to-government and domestic debt from 1976-2006.

Commercial debt, or debt to private banks, made up 44% of Ecuador's interest payments in 2007, considerably more than the 27% paid to multilateral institutions such as the International Monetary Fund (IMF). But the report also lambasted multilateral debt, saying that many IMF and World Bank loans were used to advance the interests of transnational corporations. Ecuador's military dictatorship (1974-1979) was the first government to lead the country into indebtedness.

The commission found that usurious interest rates were applied for many bonds and that past Ecuadorian governments illegally took other loans on. Debt restructurings consistently forced Ecuador to take on more foreign debt to pay outstanding debt, and often at much higher interest rates. The commission also charged that the U.S. Federal Reserve's late 1970's interest rate hikes constituted a "unilateral" increase in global rates, compounding Ecuador's indebtedness.

<snip>

http://www.alternet.org/audits/108769/as_crisis_mounts%2C_ecuador_declares_foreign_debt_illegitimate_and_illegal/

[sam sarrha]

1. we need to recalculate our debt with china to a realistic currency value

[oldnslo]

2. Same Here

I hereby declare all my personal debt to be illegal and illegitimate.

There, that really helped, and I feel so much better. Take that, creditors. I'm sorry I couldn't have racked up even more illegal and illegitimate debt. Nya, nya nya nya nyaaaa....

[Bucky]

6. Good call. I'm declaring the yard around my duplex as a the Republic of Boo-Buckaroo

Looks like my monthly rental just went down 100%!

Now I'm off to nationalize all the utilities I need.

[ColbertWatcher]

18. Well, while you're at it, would you like a bailout too? n/t

[Waiting For Everyman]

26. I just declare mine unpayable.

The "blood out of turnip" thing.

[Canuckistanian]

3. Just call it a "national security issue"

ONE country I could name uses this rationale for almost ANYTHING it wants to do. Or ignore. Or steal.

The precedent has now been set.

[geckosfeet]

4. $3.9 billion - chump change on Wall St. these days.

[valerief]

7. Yeah, isn't that, like, a single CEO bonus when he topples his company? nt

[Zorro]

5. This is how you kill off foreign investment in Ecuador

I believe Correa has not yet decided to default on the debt, because there may be serious ramifications to the Ecuadorean economy if he does.

And he, like his colleague in Venezuela, will be facing reduced oil revenues in the foreseeable future. The reduced ability to service this debt may be a motivating factor for considering a default.

Correa is also reportedly planning to increase import tariffs on over 900 items, which he imagines will increase government revenues while protecting domestic industries.

Perhaps these are wise actions to take, but I have my doubts.

[Orwellian_Ghost]

8. Just cleaning up the garbage

They've already paid their debt many times over, except it wasn't a debt:

http://www.democracynow.org/2004/11/9/confessions_of_an_economic_hit_man

"The book was to be dedicated to the presidents of two countries, men who had been his clients whom I respected and thought of as kindred spirits–Jaime Roldós, president of Ecuador, and Omar Torrijos, president of Panama. Both had just died in fiery crashes. Their deaths were not accidental. They were assassinated because they opposed that fraternity of corporate, government, and banking heads whose goal is global empire. We Economic Hit Men failed to bring Roldós and Torrijos around, and the other type of hit men, the CIA-sanctioned jackals who were always right behind us, stepped in."

[Zorro]

11. Interesting. Are you declaring Mr. Perkins' book to be the truth?

Frankly, I find his repeated assertion that he was hired by the NSA to be very questionable, since economic policy isn't their domain.

Which calls his credibility into question.

[Orwellian_Ghost]

14. Are you familiar

with US involvement in Ecuador, and elsewhere in the region, over the last 50 years?

[Zorro]

16. Well yes, probably more so than many others

since I've owned property there for the past 2 decades.

[judasdisney]

28. He was subcontracted by the NSA, and we don't know what their full domain is

Any claim that the NSA's full range of activity is public leads me to call your credibility into question. Every intelligence organization in the U.S. has historically breached their charter, and we do not know the full charter of the NSA.

...And the extensive history of U.S. extralegal involvement in Latin America, not to mention the nature of that U.S. involvement, makes me more skeptical, not less, of those who try to discredit Perkins.

[Bucky]

9. Oh you! you're always looking at the downside of converting to a command economy!

Johnny One-Note here probably thinks the converting all the farms to worker cooperatives is a bad idea, too.

[Orwellian_Ghost]

10. Hush now

Haven't you learnt' that be you a country (with a wee bit of an imperial overlord) or an individual (with a wee bit of debt bondage) that you must always:
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x3149326">Pull yourself up by your bootstraps

Then again you could pledge allegiance to your paymasters I suppose.

[JackRiddler]

12. No, you're right...

Those people would be so much happier as wage serfs living in a company village and working in a plantation guarded by armed men and owned by a foreign corporation.

[druidity33]

29. huh?

You're talking about plantations not cooperatives. VERY different.


:shrug:

[JackRiddler]

31. Yes I know...

I thought the prior comment by Bucky was meant sarcastically against cooperatives as failures of socialism. So I responded in kind. Though you can't tell entirely. Hazards of ironic tone in electronic forms.

[Zorro]

13. So you think defaulting on international loans is a good idea?

Please explain why that's a good idea, comrade.

[Bucky]

17. (pssst-- it was sarcasm)

Real people don't refer to complete strangers as "Johnny One-Note" inasmuch as I don't know what your other notes sound like.



I should probably got back to my old sigfile that called everyone "stinky butt"

[bperci108]

19. Because it's time to cut the legs out from under the Banksters.

Good for Ecuador.

I hope every other nation of wage slaves under the yoke of the Owning Class does likewise.

The "help" of the IMF is nothing but old-fashioned imperialism with a shiny new coat of paint and cadres of PR spin-masters to sell it to the dupes and dopes.

New look - Old enslavement.


(And there are some of us who take the sobriquet "comrade" and wear it with pride; sort of like "Yankee Doodle". But I know what you were trying to imply...and you are correct, sir.) :evilgrin:

[Zorro]

20. So do you have a mortgage or use credit cards?

Because if you do then I suppose you are likewise under the yoke of the Owning Class.

[bperci108]

32. No, and yes respectively. And you hit the nail on the head.

That's how nearly all of us are kept as wage-slaves:

Debt.

I doubt I have to bring up the recent (and ongoing) financial debacle to illustrate what happens when the wealthy use debt to profit off of other people's desperation and misery.

Both mortgages and consumer credit could be useful instruments IF the greed and speculation were taken out of the equation. Remember the local bank that existed before the deregulation orgy of the 80's-90's?

(One of the reasons I've always been a credit union member. What a positively Bolshevist idea...LOL.) ;)

[Chulanowa]

24. Did you read the article?

Every time Ecuador has paid its dept, it turns out that the "actual" debt was actually a little higher... and puppet stooges of corporate interest would then borrow money to pay the debt - at a higher interest rate, no less.

Ecuador doesn't owe money any more than a nation from whom tribute is being demanded is in debt. It's being forced to pillage itself under threat of even harsher penalties, thanks to entrenched corporate interests

[JDPriestly]

21. Zorro, the U.S. is also a debtor nation.

How do you propose that the U.S. should pay back its enormous debt to foreign creditors?

[gravity]

22. You tax people and pay it off

[bertman]

15. Is that the Seventh Fleet I see steaming over the horizon??

[BlooInBloo]

23. (facepalm)

[Waiting For Everyman]

25. It's the only way not to continue the same scam.

What the banksters did to Ecuador, they did to us too. Only we're dumb enough to put up with it.

I'd call credit default swaps and other leveraged derivatives "illegal and illegitimate" too. Same for selling-short and other fun forms of fantasy speculation. Most of what we're bailing out is fiction. Why not just say so, and void it?

Just because we've been doing these stupid things, doesn't mean we have to keep doing them.

[Mind_your_head]

27. LOL - the bankers have so far afoul of 'rational'....have run so far amuck.....

they've run themselves out of credibility/business!

[Azooz]

30. Vulture Funds

Just one of the many tools of a good economic hit-man, I think Ecuador's case happened after the vulture funds got practice in Africa, now they are bigger and have much bigger legal resources - Auto, Insurance (especially shipping), Banks and Oil companies like them to and use then often. South America is setting up it's own lending bank to minimize the future damage of the IMF and World Bank - hope it works before most of them are bankrupt.