August 20, 2009 Why in the world would a president of a small nation chose to end global financial supports, desperately needed to grow Ecuador? The answer is simple- he never understood nor desired international financial relationships that are legitimate because he is ignorant plus he is a Cuban Marxist who hates legal capitalism and more importantly- because.....you let him destroy your economy. Correa has lied about the depth of his economic prowess [non-existent] and the depth of his academics [non existent for he is a political student of Marxist advocacy] and he has lied about even comprehending how to manage a simple family credit card.
 
Goldman Sachs notes on Ecuador:    "...emerging fiscal cash crunch as the government is currently shut out of international capital markets and has limited access to multilateral financing due to the politically motivated decision to default on the 20102 and 2030 global bonds, despite a strong capacity to pay."  And with remittances vanishing at 20% already this year, Correa loses that economic subsector which frankly is as undependable as tourist income..."About half of the remittances flow comes from the United States ..."

Ecuador being "shut out" of capital markets and limited access to multilateral financing is solely due to Correa's adolescent, uneducated choices. As we have said before, Correa is not schooled in finance or in economic applications. Correa is a sloppy, shallow student and political advocate of Cuban-Marxism, which does not confer to Correa the wisdom that correistas seem to think he holds. Indeed, Correa was a radical Marxist socialist long before he was gifted with the charity to obtain in 18 months a shallow and inaccurate combination doctorate-masters degree, much like a shopping mall degree with all the emptiness and hollowness thereto. Correa has gamed his education, gamed his students, gamed his citizens and gamed his own government. You may ask how one person plays a whole nation and the answer remains- because you let him. 
  
Goldman Sachs Emerging Markets Daily Economic Comment: August 20, 2009  
  
COLOMBIA

Ecuadoran Government to Phase Out Trade Restrictions Targeting Colombian Goods

The Ecuadoran authorities announced that in two months they will lift tariffs on about 300 goods imported from Colombia and within six months will phase out all the remaining tariffs on Colombian goods.

Comment: (+) This follows the controversial decision by the Ecuadoran government to set punitive 6% to 86% tariffs on more than 1,300 goods imported from Colombia. The Ecuadoran authorities argued that the protectionist measures were due to the negative trade balance impact generated by the depreciation of the COP but the measures seemed to have a political angle. The Colombian authorities challenged the unilateral Ecuadoran decision before the Andean Community of Nations, which reviewed the case and asked the Ecuadoran authorities to modify/suspend the tariffs.

The pragmatic decision by the Ecuadoran authorities to remove the restrictions and allow for the normalization of trade flows between the two countries is a positive development that could also contribute to ease the tension around other bilateral issues.

ECUADOR

Central Bank to Use About US$300 Million Reserves to Support Domestic Credit Growth

Central Bank officials acknowledged that a resolution has been approved for the central bank to create a mechanism to lend US$300 million of its reserves (anchored by deposits of the Social Security Institute; IESS) to the state-owned National Financial Corporation (CFN). The central bank will issue a bond yielding 6.25% to 6.50% to the IESS and will pass the funds to the CFN, which will use the money to grant new loans to stimulate the economy. The IESS currently holds about US$800 million in deposits at the central bank. Part of the central bank reserves are invested abroad in highly liquid low-risk assets.

Comment: This is a negative development inasmuch as these reserves will now be invested in less liquid assets and exposed to credit risk. Furthermore, there are few guarantees that the new loans will not be allocated according to political rather than strictly technical and financial criteria. A recently approved new constitution has virtually eliminated the autonomy of the central bank vis-à-vis the executive.
 
ECUADOR

Government to Obtain a US$1 Billion Loan from China

Following the US$1 billion payment advance by PetroChina for future oil shipments (at a 7.5% interest rate) the Ecuadorian government is also likely to get a US$1 billion loan from the Chinese authorities. This is likely to contribute significantly to alleviate the emerging fiscal cash crunch as the government is currently shut out of international capital markets and has limited access to multilateral financing due to the politically motivated decision to default on the 20102 and 2030 global bonds, despite a strong capacity to pay.

Workers Remittances Down 20% YoY During 2Q2009

The central bank reported that workers' remittances dropped 19.7% yoy during 2Q2009 to US$310 million. During 1H2009 remittances were reported down 20.9% yoy. About half of the remittances flow comes from the United States and most of the rest from Spain and Italy. Declining remittances weaken the current account as they add to the deteriorating trade balance driven by lower oil prices and declining export volumes.

Please do not misunderstand us- we are happy when any nation balances its accounts and chooses not to over spend and over tax and over-borrow money.

But Correa chooses to only run money with Chavez, with Iran, with the FARC, with off the books speculators...anyone who is dirty and refuses transparency and accountability. Too many Ecuadoreans say that Correa is brilliant because he was a USA trained economist and will not be a dirty economist. This laughable misnomer -a lie really- is known because in all things Correa has not once ever acted with accountability, transparency or with any advise and consent. Correa acts as a dictator and has stolen from private businesses, his own citizens,.foreigners and all that he touches, including raiding the Central Bank of Ecuador while plunging Petroecuador in to a fully illegal, off the books betting operation. Correa does this by choice.

We are also happy when Correa declares that he is fighting against drugs when mysteriously his own discover long buried underground stashes of cocaine outside Esmeraldas. We hope that the so called cocaine is not sugar. We have hope that it is not simply a recycled former stash of formerly confiscated coke, not unlike some central bank of cocaine. We hope that the stash is verified and publicly burned. We hope that Correa will stop his own complicity with the FARC and amend Ecuador's 9-08 constitution to re-criminalize all crime, today all legalized. Was the US DEA on hand to herald and mark chain of custody and verify this find? Was INTERPOL asked to confirm as well? The UN's drug officials? Colombia's counternarcotics team? Someone? Anyone?  Any facts as to how the coke got them- tons of cocaine. Any reports on where it has gone or why? Any notation of who processed this drug and who was scheduled to be running it off the coast of Ecuador....in boats, in airplanes, in submarines- all blessed and approved by the Correa drug running goons? Anyone?

As if to confirm his now-oft-stated total commitment to Chavez and Castro, Rafael Correa is off next week for a family vacation ....in Cuba. Clearly no one informed el presidente that Cuba is short of toilet paper and of course the worst part- humans only vacation in Cuba these days for either cheap sex or....doing business with the regime. Neither option promises sound health.

-Pedro Camargo for ECrisis