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Capital markets: Ecuador builds steam for international re-entry

Fitch upgrade a propitious sign despite default history; Oil-field developments and hydro-power prospects

Ecuador remains on course, following a credit rating upgrade by Fitch Ratings, to issue its first sovereign bond since its $3.2 billion default in 2008. It is expected to offer the debt this year or in 2014 and would follow the successful bond debuts of two other small Latin American nations, Bolivia and Paraguay, earlier this year. Neither the terms nor the amount of an Ecuadorian offering are yet known. Bolivia and Paraguay both sold $500 million.

In mid-October, Fitch Ratings upgraded Ecuador to B from B- and gave it a stable outlook; this followed a change in its outlook from stable to positive in 2012. Fitch said the latest move reflected the country’s continued healthy growth performance, as well as monetary and financial stability, underpinned by 100% dollarization of the economy. It added that a steady easing of external and fiscal financing risks as a result of still favourable international oil prices, improved prospects in the oil sector, as well as continued availability of bilateral financing from China and multilaterals also helped the nation’s prospects.

"Ecuador’s economic growth has slowed down a bit this year," says Erich Arispe, a director for Latin American sovereigns at Fitch Ratings.

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