Setting the bar low, Ecuador edition

Ecuador is a serial defaulter on its debts.  In 183 years, the country has never managed to pay back any of its bonds on time. Until now that is!

Ecuadorean President Correa actually took to the twitter-verse to crow about the repayment.  Seriously!  I guess when you set the bar low enough, even a small accomplishment seems huge.  As a side note, who are these crazily optimistic bondholders?  I understand lending Ecuador money the first time.  But how about the thousands of times since?  Is there no learning curve?

Bondholders couldn’t have been too confident about repayment as the same President railed against international financial markets in 2008, saying the external debt was “‘illegitimate’, its bondholders ‘real monsters.’”  Ecuador eventually defaulted on  $3.2bn of global bonds (duh, of course they did) and later bought back its debt on the secondary market for “35 cents on the dollar.”

I’m guessing this is just a blip in an otherwise perfect track record and Ecuador will be back to its defaulting ways soon.



“Cleaning” up Quito, one sentence at a time

For any Spanish students hoping to improve their grammatical skills, I’d recommend joining Acción Ortográfica, a Ecuadorian group that corrects the grammar of graffiti around Quito.  This looks like the most fun way imaginable of learning the rules of Spanish grammar.

The group takes their name from a poet graffiti organization that was founded in Mexico in 1966:  Acción Poetica.  According to Mental Floss, members of this movement”have been graffiting love poems and quotes about friendship and optimism across Latin America for decades,” but not always in the most grammatically correct ways.  Here’s an example of Acción Ortográfica in action:


Obviously the police don’t care whether you are creating graffiti to post love poems or correct grammar–either way is still illegal, so members must work at night.  They have shifted to a possibly even more dangerous game of late, correcting the temperamental and volatile President Correa’s tweets.  From this example, it seems like he needs the help:


While they claim that they only care about good grammar (and aren’t attacking Correa politically), we know how little of a sense of humor Correa has (especially about himself).

What could possibly go wrong?

I just learned that Ecuador, which currently uses the US dollar as its currency, is planning to distribute a new digital currency in December.   They do have a President that has a Ph.D. in Economics, although I don’t know if that’s reassuring or worrying.  Here is one supposed benefit that I’m skeptical about (for a variety of reasons):

With public debt at its highest level since 2010 (roughly 25% of the nation’s GDP), Ecuador’s president Rafael Correa views the digital currency as a way to pay off debt and help poorer Ecuadorians, who are largely cut off from traditional banking.

LOLZ, sounds like Dr. Rafa is tired of not having a seignorage level to yank on. And of course, you can help poor, unbanked citizens without introducing a digital currency, just look at the success of M-PESA  (mobile money) in Kenya!

The whole point of digital currencies is to get out from under government regulation. A government run digital currency is a delicious oxymoron.

The article does mention some very clear drawbacks to the plan, including:

Digital money is also more difficult for people to wrap their heads around and trust.

A centralized digital currency (one controlled by a state’s central bank rather than market forces) may be easier to replicate and counterfeit, says Bonney, so it requires investing in protection from cyber attacks. For example, Bitcoin, the world’s largest digital currency, relies on powerful computers and sophisticated cryptography to stay secure.
For now, the Ecuadorian government has banned Bitcoin in favor of a digital currency it can regulate. 

To say nothing about concerns that the government has put spyware in to monitor all uses of the new currency.

This is either a weird publicity stunt or the beginning of the end of the hard-won low inflation regime in Ecuador. I’m putting .65 of the probability on weird stunt.

What do you guys think


“Pay us or we’ll shoot the trees”

NPR had an interesting piece on Monday called Ecuador To World: Pay Up To Save The Rainforest. World To Ecuador: Meh. 

In an offer that sounds a bit like blackmail, the Ecuadorian government offered to keep the Amazon free of oil drilling as long as others paid them $3.6 billion, or half of the estimated oil in the region.

Ivonne A-Baki, a government official, traveled the world asking for help.  As she put it, “Even the sound of the motor will destroy the fragility of this place.”  And as NPR put it, “pay us or we’ll shoot the trees.”

The government did manage to raise $6.5 million, but this was obviously far short of the amount they wanted.  While I wouldn’t have expected this to work, it is an interesting idea to find out who values the resources the most.  President Correa recently put an end to the idea, calling it “one of the hardest decisions of his presidency.” (I wonder what happens to the $6.5 million)

Correa is a Ph.D. economist and has a good idea of the costs and benefits of environmental protection in a poor country.  In a recent TV address, he asked the country:  “Do we protect 100 percent of the Yasuní and have no resources to meet the urgent needs of our people, or do we save 99 percent of it and have $18 billion to fight poverty?”