Will Ecuador once again set an example of courage in the face of creditors?

24 March 2020

Will Ecuador once again set an example of courage in the face of creditors? On March 23, 2020, the National Assembly adopted by a majority vote a resolution calling for all State resources to be mobilized to combat the coronavirus pandemic. Consequently, the National Assembly calls on the country’s government to request from the IMF and other creditor agencies the suspension of payment of external debt.

It should be noted that on 24 March Ecuador is expected to repay $325 million for securities sold on Wall Street and called “Bonos Global 2020”. In addition, more than $600 million is to be paid to other creditors by the end of March.

That is why, in view of the urgent need for financing, more and more Ecuadorians believe that debt payments should be suspended so that this money can be used to fight the coronavirus pandemic that has just reached the country and its neighbours.

The National Assembly also asks the government to seek to form a union with the other governments of the continent in order to suspend together the payment of the public external debt.

The CADTM considers that Ecuador is perfectly entitled to decree a suspension of debt payments in order to effectively combat the health crisis that will severely affect the country. In order to do so, Ecuador can rely, inter alia, on international law, which recognizes the right of a country to suspend debt payments if the situation obliges it to do so. This is what is known as a state of necessity. It is also a case of force majeure.

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Other legal arguments can be invoked, such as the fundamental change of circumstances between the time when the country committed to repaying its debt and the present situation. At least two fundamental changes of circumstances have occurred recently: 1. the coronavirus pandemic. 2. The halving of the price of oil. Ecuador’s main resource in dollars comes from the export of its oil. And Ecuador needs these dollars to pay off its foreign debt.

The general arguments that the CADTM has just put forward are of course valid for other countries facing the Coronavirus crisis whether they are oil exporters or not.

As a reminder: Ecuador suspended debt payments in 2008, following the work of a citizens’ audit commission in which the CADTM participated. Thanks to this suspension of payment, Ecuador forced foreign creditor banks to reduce the debt by 70% in the form of global Bonos 2012-2030. As a result, Ecuador was able to increase social spending between 2009 and 2011 for the benefit of the majority of the population https://www.cadtm.org/Video-The-Ecuador-debt-audit-a.

It should also be recalled that the Ecuadorian people, by mobilising massively in September 2019, forced President Lenin Moreno to cancel the increase in fuel prices that he had decided to apply in consultation with the IMF. This is one of the few social victories of the year 2019 at the global level.

If Ecuador suspended payment in 2020, its example could be followed by other countries.

Let us wish the Ecuadorian people much courage.