Ecuador 2008

About Ecuador 2008

Ecuador defaulted on 3.2 billion in Global 2012 bonds in December 2008. President Rafael Correa called the debt illegitimate, arguing it had been contracted by military dictatorships. Ecuador offered to buy back the bonds at 35 cents on the dollar. Approximately 91 percent of bondholders accepted. Ecuador completed its restructuring in 2009. The default was notable because Ecuador could have paid. Correa, an economist, argued that the debt was fundamentally unjust. Ecuador re-entered international bond markets in 2014. The case was unusual because most sovereign defaults are driven by inability to pay rather than willingness to pay. Ecuadors selective default demonstrated that political decisions can drive defaults even when economic capacity exists.