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Capital Markets

Chávez to save Ecuador?

Venezuela's president considers buying Ecuador bond

Revolutionary. Charismatic leader. Firebrand anti-capitalist. Hugo Chávez is a man of many talents. But fund manager and lender of last resort? Absolutely, if his decision to create a Latin American debt fund is anything to go by, especially if it supplies Ecuador with much-needed cash.

On July 12, Nelson Merentes, Venezuela's economy minister, announced the creation of the fund. The next day Rafael Correa, Ecuador's finance minister, flew to Caracas to try to make a placement of $500 million of sovereign bonds directly with Venezuela.

If successful the deal will stave off a potential default by Ecuador, at least this year. The tiny Andean nation is in a desperate position. Attempts to borrow money from the IMF have failed and concerns are mounting about the new government's economic strategy. So Chávez's decision to create the fund could not have been better timed for the Ecuadorians.

For Chávez, nothing would suit him better than being seen as the last-minute hero, especially as he tries to become the region's dominant force. And it wouldn't be the first time he would have invested in Latin debt. Earlier in the summer, Argentina sold Boden 12 bonds directly to Venezuela.

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