Why Ecuador is drilling for oil

Because the stupid tosser decided not to pay off debts that the country could well afford and so defaulted on their bonds.

At which point no one will lend him any money. Thus, borrow from the Chinese against future oil revenues. Which does mean of course, that you’ve got to drill for the oil.

Entirely his own fault.

Funny argument Tim. Ecuador entered the 2000s with a large accumulation of debt ran up successive kleptocratic dictatorships. Practically I understand that paying off this debt might be worth the cost. Access to capital markets is really useful even if they are inhabited by the sorts of people who lend to money hungry kleptocracies. But that’s a tragedy, it definitely doesn’t make someone a “stupid tosser.”

The world is perfectly able to coordinate a response to the default on odious debts, but not to saving a rainforest and battling climate change. That also seems like a tragedy to me.

Tim also ignores the positive externalities of all this. Rafa’s policy of not paying off odious debts will push up the borrowing costs of dictators and tyrants. Seems like some lovely side effects to me. Pity that Ecuadorians have to continue suffering.


4 thoughts on “Why Ecuador is drilling for oil

  1. Sad watching right wingers scramble around trying to denigrate a clear example of a successful socialist. The comments also seem to be hoping for the worst to happen to Ecuadoreans.

    Oh well…

  2. Tim is right that Correa is stupid. Have you heard of inflation? This progressively reduces the real value of old debt. And if the debt is denominated in local currency, a devaluation can, perfectly legally, reduce the value to foreign creditors. So Correa could have kept borrowing enough to repay old debt and cover his budget deficit if he had, nominally, honoured existing debt. We have a prime example here and, even if you hate Osborne, you know the *he* isn’t stupid.
    Secondly what kleptocratic dictatorships? Ecuador has had democratic (mainly left-wing or centre-left) governments since 1979. That is just sloppy.

    1. I don’t buy it I’m afraid. The governments Ecuador has had for most of its history have been awful with little democratic legitimacy.

      Ecuador has adopted the dollar because it inflated away its debt one two many times. So your option (which is superior) isn’t available.

      1. It is easy to find out US $ Inflation: it has been 221% since 1979. i.e. the real value of repaying today a $ that the last military government borrowed would be 31c
        Had you failed to notice that the USA has been using inflation to debase its debts (formal borrowings plus $ notes issued) ever since it confiscated its citizens’ gold? A $ in 1933 was worth 18 times a $ in 2013.
        Ecuador has had democratically elected civilian governments continuously since 1979, and only 7 years (the Cromwells ruled longer!) of military dictatorships since independence your claim of “little democratic legitimacy” is just weird.

Comments are closed.