Ecuador adds CAF loan to multilateral haul

Ecuador adds CAF loan to multilateral haul

Loans Economy & Policy Corporate & Sovereign Strategy Debt Coronavirus Ecuador Andean

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Ecuador got $400 million in emergency funds from Latin American development bank CAF on Friday, bringing the total amount raised from multilateral institutions this week to $1.5 billion.

Ecuador has taken out multilateral loans at "very favorable terms for the country," Finance Minister Richard Martínez said in a tweet.

The CAF financing comes in two parts with $350 million in 20-year loan at 2.5% and $50 million in a 12-year loan at 2.4%, according to a Twitter thread from the Finance Ministry. The 20-year loan has a grace period of six months and the 12-year has two years, it said.

The $50 million loan will "counteract the impact of COVID-19 in the coming months," while the larger loan will go to a government program to "contain the social, economic and financial emergency," the ministry said.

Earlier the same week, Ecuador secured $643 million in emergency funding from the International Monetary Fund and $500 million from the World Bank.

Investors reacted favorably to Ecuador borrowing from multilaterals – "It will attenuate the country's crisis," one said – but it may not have much influence in talks with bondholders.

"The multilateral funds have no bearing on policy framework or creditor relations," said Siobhan Morden, head of Latin America fixed income strategy at Amherst Pierpont Securities in New York. "Ecuador has been rallying for weeks on their pragmatism to approach bondholders in an orderly and rational way."