January 23, 2009   ECrisis extends our commendations to U.S. ambassador Heather Hodges for her recent media interview in Quito wherein she rejected several of the silly "populist"-communist propaganda Talking Points currently so in vogue across lazy, irresponsible spoon - fed Andean souls, so easily seduced and lulled by DISIP-Cuban disinformation campaigns across all the Americas. Hodges denied that the USA was ever an "empire" for starters and also deemed the core of the UN which is the right of any nation to self defense under terrorist attacks. That means....Colombia has the right to fight against the FARC under all applications of international law. We say- good for Hodges. Of course had she not spoken these essential facts, she would be on the next plane back to USA desk job oblivion. See her interview here and understand why we commend her for explaining the very very basics of diplomacy- a serious matter which is long overdue and often never considered.
 
Hodges easily, albeitly correctly as if handed by State Department Talking Points currently on their web site, went skating across "global" foreign policy issues and sadly avoided speaking truth to power about the burgeoning business of building Correa's criminal cartel  empire. And still Hodges has yet to actually read Rafael Correa's so called 9-08 constitution nor make any legitimate analysis of what this actually means. Maybe she is following in the footsteps of her predecessor who so blatantly told us all that Correa's legalizing document of all that should never be legalized was oh, so necessary because, as she and her team ineptly explained, the poor just needed this and the oligarchs [which do not exist] needed to go. In other words. Lenin and Marx uber alles for better crime and duplicity. And still those voices continue radiating from Heather Hodges's highly protected new embassy for more fun and contractor profit to protect and defend the cartel that is Correa. And that cartel, if she were seriously honest, is formally linked with Iran today. Here is part of the crime story of how it is done:

"Guns From Londonistan

By Reuben F. Johnson
Weekly Standard | 1/20/2009

Vienna
"Londonistan" is the nickname given to the UK capitol in 1995 by France's counterterrorism service, partly out of frustration over the safe haven that the city offers to radical Islamist groups that have been exiled from their home countries and/or other EU nations. The year 2009 began with a story that offers a whole new dimension as to how that nickname fits better than most of us would have imagined.

This past week one of the major UK banks, Lloyds TBS Group, paid $350 million to New York State and U.S. Federal authorities in an out-of-court settlement. The fine was paid over charges that Lloyds obscured the fact that billions of dollars that had passed from its office and then through U.S banks and finally on to other foreign destinations had originated in Iran, Libya, and Sudan in violation of U.S. sanctions on those nations. It is the largest fine ever paid in the history of the Manhattan DA's office..." Read it here.

But Goldman Sachs reports that all is not going well in this manipulative world of the now bankrupt and unwelcome anywhere Ecuador under Correa:

The 1-21-09 GOLDMAN SACHS Emerging Market report on      ECUADOR reports:

Government Hires Financial Adviser

President Correa announced the government hired Lazard Frères (one of the companies that advised the Argentine government after the default) to advise on the plan to buy back at a likely deep discount US$3.2 billion (face value) of the 2012s and 2030s.

President Correa stated that the main issue the government has with the Global bonds is its price, which shows the government has been gradually distancing itself from the early aggressive rhetoric that the bonds are illegal.

President Correa said the government will present a “buyback along with a restructuring” proposal, which is perhaps an indication that the government could buy back the old bonds and in tandem offer new bonds in order to limit the cash outlays.

In addition, President Correa stated US-based lawyers are currently preparing the legal defense of the government in case bondholders move to sue the government. Finally, President Correa reiterated that bondholders that do not accept the government offer will be sued.

Trustee Unable to Enact 2015 Coupon Payment Before January 15 Grace Period Expiration

The government transferred on January 13 the US$30.5 million to pay the coupon on the 2015 bonds to the trustee in the US, but the trustee could not disburse the funds to bondholders because the government did not comply with the requirement of notifying the trustee of the “establishment of special record and payment dates.” Once the trustee receives the required notification, it will take an additional 25 days to enact the payment to bondholders

This will delay the payment to bondholders beyond the end of the 30-day grace period (which ended January 15) which led Standard & Poor's to downgrade the 2015s rating to “D” from “C”, placing the issue in technical default.

In addition, S&P revised upward the recovery rate on the 2012 and 2030 global from category “6” to “5” which indicates an expectation of a modest 10%-30% recovery. The revision was triggered by the fact that the government has indicated that it will pursue a restructuring/buyback rather than see an outright repudiation of the debt.

Finally, S&P maintained the expected recovery rating of the 2015s in category 5 despite the fact that the government has indicated it intends to stay current on the 2015s because the domestic economic picture continues to deteriorate and potential legal action to block the payments on the 15s as they are pari-passu with the defaulted 12s and 30s.

Government Will Restrict Import of Consumer Goods

President Correa announced that the government has reached agreements with a number of private firms to reduce imports by US$1.5 billion in 2009 (the agreement with importers involves around 294 different consumer goods).

In addition, the government will enact import restrictions (lower quotas and higher tariffs that could reach 75%) on about 330 other goods.

Comment: The government is resorting to trade protectionism to deal with the sharp deterioration of the trade balance on the back of lower oil prices. In our assessment, trade protectionism/repression is hardly the type of measure that will protect the external accounts and dollarization over the medium term. Only a business/investment-friendly approach coupled with reforms to increase total factor productivity growth could provide a long-lasting solution to the deteriorating trade balance, in our view.

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We are skeptical. We are disgusted that any president who says that if a bond holder does not agree with his buy back, the owner....will be sued.

Extortion as a tactic works very well inside the homes of almost all Ecuadoreans today...and revered. This is no tactic that is tenable in the financial market. Extortion and racketeering are the hallmarks of failed societies, failed families and failed finances. While the Lebanese may applaud rackets, the real world does not. Here is what the real world looks like, unvarnished:

"Commentary
Terror At Hugo Chavez's Hand
Michael Rowan and Douglas E. Schoen , 01.21.09, 02:12 PM EST

The threat of collusion amongst Venezuela, Iran and Hezbollah.

After the Israeli attack on Gaza, Iran and Hezbollah may retaliate asymmetrically--via Venezuela's Hugo Chavez.

Chavez is an expert in asymmetric war and deception, a strategic ally of Iran in a declared war against the "evil empire" of America and a harbormaster for Hezbollah, Hamas and terrorist groups in Latin America

He has all the weapons needed to terrorize the U.S., including the capacity to build a dirty bomb--or another biological weapon--and the ability to move money or materials across American borders at will through the 14,000 American gas stations he owns...." Read it here.

Although Hillary Clinton testified last week before the US Congress that she personally will promote the ridiculous notion that Brazil's ethanol must be imported duty free to the USA, to assist her friends in the George Soros class of investors such as Soros's own Armenio Fraga to pump up markets which are not needed nor have any value, we note today in LATIN FINANCE that "Crushed by Debt, Ethanol Giant Seeks Sale by SantelisaVale Bioenergia, one of Brazil's largest ..."

While nothing from Brazil is transparent and all now has the veneer of an offshore hedge fund, we can only guess where all of Brazil's "leverage" will lead it and none of it sounds very responsible at all. But Correa has announced that Ecuador and Brazil will now have closer ties, thanks to Cuba, Venezuela and Iran's diplomatic interference to strengthen their Marxist-terror proxies.

We can only hope that full scale independent forensic audits are underway for all that is Ecuador today. No excuses.

-Pedro Camargo for ECrisis