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Ecuador official accused of skewing markets
By Hal Weitzman in Lima
Published: July 12 2007 19:26 | Last updated: July 12 2007 19:26
Ecuador’s Congress is expected to censure the finance minister on Friday over accusations he deliberately manipulated international bond markets for financial gain.
The move is likely to sully Quito’s reputation further in the eyes of investors. Although the allegations may never be proved and the censure motion itself is non-binding, the scandal has cast a pall over President Rafael Correa’s leftwing administration just seven months after it assumed office.
A source familiar with the US Securities and Exchange Commission said the claims had attracted the regulator’s interest, although the SEC refused to comment. Friday’s vote also heralds a fresh battle in the war between Ecuador’s government and Congress, adding to fears of political instability.
The affair dates back to May, when a video surfaced of a meeting on February 12 between Ricardo Patiño, Ecuador’s finance minister, Armando Rodas, a former finance minister, and Carlos Abadi and Alan Dayan, representatives of Abadi & Co, a New York investment firm.
In the video, taken days before the government was due to pay a $135m (€98m, £67m) coupon payment to holders of its bonds due in 2030, Mr Patiño says: “If the market wants to benefit, it has to want me to scare it.” He discusses an apparent plan for investors to gain between $150m and $200m, while the state would net $50m.
Mr Correa and his ministers have seemed at times to delight in unnerving markets. “Those who own the global bonds know they’re speculating and can lose or win,” the president said in March. “The strategy of this government is to create uncertainty.” But the video appeared to show for the first time that Ecuador had sought to profit from that guessing game.
Brian