Ecuador secures $1bn in credit, oil flows stagnant

Ecuador has secured $1.1bn in fresh international loans as it struggles to boost oil production that is the leading source of export revenue.

The loan package, which is aimed at closing a 2018 government spending gap, includes a $500mn repurchase agreement (repo) with Goldman Sachs with a Libor three-month plus 4.25pc/yr interest rate, maturing in 2022, according to Ecuador's finance ministry.

The Goldman Sachs credit is secured by $1.2bn in government bonds. If the tiny Opec country does not repay the loan by 2022, the investment bank could cash the bonds.

In a controversial operation in May 2014, Ecuador swapped half of its gold reserves for a $400mn loan from Goldman Sachs at 4.3pc/yr interest. The credit was repaid and Quito redeemed its gold.

Aside from the new Goldman Sachs credit, the Inter-American Development Bank (IDB) pledged to $237.6mn in credit at a 3.28pc/yr interest rate, with a 25-year maturity.

In a separate operation, IDB agreed to lend another $250mn to help finance construction of a subway for Ecuador's capital Quito, with a 3.28pc/yr interest rate and a 25-year period to repay the loan.

And the Andean Development Bank CAF approved a 12-year $150mn credit to help finance electricity projects, at 4.28pc/yr interest.

Quito needs around $2.4bn more to address its 2018 fiscal imbalance. The public-sector deficit is expected to drop to 3.9pc in 2018, down from 5pc in 2017 and 7.4pc in 2016, but that level is still considered high for a dollarized economy, according to Fitch Ratings.

President Lenin Moreno has vowed to reduce the public sector deficit to less than 1pc of GDP by 2021 through a series of austerity measures.

So far, the government has increased the price of high-octane gasoline to help cut $3bn in fuel subsidies this year. Other measures include halving the number of government ministries to 20, restructuring state-owned companies and reviewing diesel subsidies for industrial activities.

Crude production in August dropped by 1.21pc year on year to 530,264 b/d, and was almost flat compared to July, closing below a 540,000 b/d official target for the second half of August.

The expected increase was to come mainly from development of state-owned PetroAmazonas' Ishpingo-Tambococha-Tiputini (ITT) heavy crude complex, where output was supposed to reach 80,000 b/d in August from 70,000 b/d in July.

But August ITT output averaged just 72,900 b/d, according to preliminary PetroAmazonas production reports seen by Argus.