Business

U.S. development bank strikes to help Ecuador pay Chinese mortgages

The US International Development Finance Corporation has signed a contract to help Ecuador repay billions of dollars in loans to China in exchange for excluding Chinese companies from its telecommunications network.

Adam Behrer, CEO of the U.S. Development Bank, signed a deal Thursday at an event with Ecuadorian President Lenín Moreno, calling it a “new model” to drive China out of Latin American countries. called.

“This is a novel approach that combines both DFC missions in a very powerful way,” says Behrer. “The first is to influence the development of Ecuador in a very positive way. And the second reason why DFC was created is that a single authoritarian country has excessive influence over other countries. We are working on that factor in this agreement so that we do not have. “

The retiring Trump administration hopes that the deal will provide a template that encourages other countries to separate China’s debt and remove Chinese carriers from its network.

The DFC gave a briefing to Joe Biden’s transition team in the presidential election and to Democratic and Republican senators. Mr. Behrer said the Biden team sees the new structure as an interesting and innovative approach.

“This is neither a democratic priority nor a Republican priority. It is an American priority,” Mr. Behrer told the Financial Times.

DFC partners with private financial institutions on development projects around the world, but Washington sees it as a foreign policy tool because banks can tie development funding.

In a previous interview with FT, Mr. Behrer acknowledged that DFC did not lead foreign policy, but what China is doing around the world and the need for the United States to “act a crime.” Said. He said China’s investment has become a “drug” for countries that create debt traps.

One of the main terms of the deal with Ecuador is that Quito signs what the Trump administration calls a “clean network.” This is a State Department initiative designed to ensure that the country eliminates China’s telecommunications services and equipment providers. Speed ​​5G network.

Under the agreement, DFC will work with private financial institutions to help create special purchasing options for purchasing oil and infrastructure assets in Ecuador. By selling the assets, Quito will provide cash to repay its debt to China sooner than previously agreed. After the repayment to Beijing, $ 3.5 billion will be unpaid. It also provides funding for various development projects.

Ecuador’s debt to China comes from Rafael Correa’s decade-long rule, which the government defaulted on the country’s sovereign debt in 2008. He then turned his back on Washington’s lending agency and agreed to a series of oil lending deals with China. It’s still paying off.

Moreno has criticized China’s trade as uncertain and harmful to the country. His government renegotiated some terms of debt and secured $ 2 billion in new funding from a Chinese bank last year.

The deal with the US Development Bank takes place just three weeks before Ecuador goes to polls to elect a new president.

Moreno has not sought re-election, and Correa has been barred from fleeing after being convicted of corruption for what he said was a politically motivated witch hunt. Although he lives in Belgium, he is still active in Ecuadorian politics and directs loyal support on the left side.

Correa anointed young economist Andres Alaus as a priority candidate for the February 7 vote. While Mr. Araus leads several polls, he is second only to right-wing banker and former Coca-Cola executive Giller Morasso in other polls.

Mr. Arauzu threatened to resume the $ 6.5 billion lending program that the Moreno government secured at the IMF last year. “It doesn’t make sense to continue the current program,” he recently told FT.

Arauze and Correa could also take a dim view of plans to move Ecuador closer to Washington and away from Beijing, especially those very close to elections and the change of government.

To follow Demetri Sevastopulo On twitter



U.S. development bank strikes to help Ecuador pay Chinese mortgages

Source link U.S. development bank strikes to help Ecuador pay Chinese mortgages

Back to top button