Ecuador strikes funding agreement with US's DFC
January 15, 2021 | Jo Bruni
Ecuador could get up to $3.5 bln from U.S. Development Bank to pay down expensive debt and reactivate the economy
Debt Capital Markets Corporate & Sovereign Strategy Economy & Policy Loans Ecuador
The government of Ecuador signed on Thursday a line of credit for up to $3.5 billion with the U.S. government's International Development Finance Corporation (DFC), just as both administrations are nearing the end of their terms.
The loan will carry a Libor plus 2.25% interest --currently 2.48% per year-- and a maturity of eight years, with a one-year grace period.
"This agreement for up to $3.5 billion will be used for early redemption of expensive debt and to reactivate the productive sector," President Lenín Moreno of Ecuador said during an online press conference that followed the signing of the agreement.
The deal is being signed in the final days of the Trump administration, and just five months before the end of president Moreno's government. Adam Boehler, chief executive officer of the DFC assured the agreement is bipartisan. Juan Sebastian Roldán, presidential secretary of Ecuador, said President Moreno was not thinking only of his administration when signing this agreement, but about the welfare of future governments.
"This framework agreement allows DFC to streamline support for projects that refinance predatory Chinese debt and help Ecuador improve the value of its strategic assets,” said Boehler. “We are proud to collaborate with Ecuador to advance this critical and strategic project with an important ally of the United States in the Western Hemisphere.”
According to the terms of the agreement, the funds for economic reactivation are tied to the contract monetization of certain state-owned assets.
"The funding will become material through concession or delegation of administration of projects on Ecuadorian soil," President Moreno said.
The government of Ecuador is looking to sell the towers belonging to the National Telecommunications Corporation (CNT) to the private sector. It is also considering concession or delegation of administration projects in the oil and electric sectors.
"There is a more efficient use of certain assets that the government currently has," Mauricio Pozo Minister of Finance of Ecuador said. "What we are doing with the agreement is getting the resources in advance once projects are identified. And once the asset is monetized we will decide how we will use the resources, be it to pay back DFC or to reactivate another sector of the economy."