Ecuador mulls debt buyback in 2008

By Carlos Andrade

QUITO (Reuters) - Ecuador has not ruled out buying back parts of its global bonds due in 2012 and 2030 this year if conditions are favorable, but it will not issue new foreign debt in 2008, Finance Minister Fausto Ortiz said on Tuesday.

Ecuador is analyzing all available options to improve its debt profile and will lower its public debt service burden by around $1.2 billion this year from 2007, Ortiz said, speaking at the Reuters Latin America Investment Summit in Quito.

"It is important to say that the weight of the debt service is no longer the main problem of the state budget," Ortiz said. "All financial options (to reprofile debt) are on the table."

The option to buy back parts of the debt will depend on the impact a possible U.S. recession has on foreign markets as well as the costs to fix damage to the Andean nation's infrastructure and key crops after recent heavy rains and flooding, he said.

Widespread flooding has prompted other government officials to predict slow economic growth this year, but Ortiz says he hopes the world's top banana exporter will keep on track with its 4.2 percent growth target.

But inflation will rise to around 5 percent in 2008, Ortiz said, above the central bank's target range of 2.9 to 3.7 percent due to the flooding and high global prices for food commodities.

Ortiz, one of the most pragmatic members of President Rafael Correa's cabinet, said Ecuador has been able to both increase social spending and honor its debt obligations.

Correa, a leftist former economy minister, scared bondholders when he took office last year by saying the country could halt debt payments if they jeopardized social spending.  Continued...