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Foreign Exchange

Ecuador: New president creates concern

Bankers see little chance of a global bond issue

Palacio: "Immoral" amounts
spent on debt service

Ecuador has yet another new president. This time it is Alfredo Palacio who is playing the role of the unassuming vice-president thrust blinking into the presidential spotlight, following the April dismissal of Lucio Gutierrez by congress. Gutierrez is the third Ecuadorean president in eight years to be forced out of office before his term was up. As is usual in such circumstances, Palacio started in his new job by trying to placate the mobs on the streets of Quito. One way he did this was to denounce his predecessor's economic policies, which, while far from by-the-book orthodoxy, were at least keeping Ecuador's always fragile finances in reasonable shape.

Within a couple of weeks, it was clear that Palacio would remain president for long enough to be capable of seriously damaging the economy should he be so inclined. And his choice of finance minister – Rafael Correa, an academic formerly known mainly for his campaign against Ecuador's dollarization – was not encouraging.

Between them, Palacio and Correa are long on leftist rhetoric and short on experience dealing with the international community, especially Wall Street.

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