Moody's lowers Ecuador

Moody's Investors Service said it downgraded Ecuador's sovereign ratings in light of the government's announcement that it will not pay the coupon on the 2012 global bonds on time.

Downgraded to Caa1 were Ecuador's B3 foreign-currency government bond rating, B3 foreign-currency bank deposit ceiling and B3 foreign-currency country bond ceiling.

These ratings were placed on review for further possible downgrade.

The agency said the government's announcement that it will not honor its obligations to bondholders on the Nov. 17 coupon payment date despite ample liquidity underscores Ecuador's poor willingness to pay. The current government has consistently emphasized that, if faced with a trade-off between implementing its ambitious social agenda and meeting its external debt obligations, it would forego debt payments, S&P noted.

But given the extraordinarily good performance of Ecuador's fiscal accounts so far this year and the sizeable accumulation of government deposits, the timing of this decision is surprising as it is clear that such a trade-off does not currently exist, the agency said.

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