Ecuador Is Freakin' Amazing.

Ecuador Begins Unprecedented Debt Audit

On 23 July, in Guayaquil Ecuador, the Ecuadorian Ministry of Economy and Finance launched the world`s first debt audit commission to have the full support and involvement of the government.

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The "Comision para la Auditoría Integral de la Deuda Publica" (CAIC) is composed of national and international experts in the fields of debt, economics, law and local social and environmental struggles, coupled with representatives of the Ministry of Economy and Finance, the Procurador, the Auditor General, and Civic Corruption Authority.

International advisors to the audit commission include:

Alejandro Olmos of Argentina

Oscar Ugarteche, Peruvian economist

Gail Hurley, Eurodad

Jurgen Kaiser, Erlassjahr.de

Maria Lucia Fatorelli, Brazil

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Eric Toussaint, Belgium

The commission has one year to investigate individual credit agreements -- which will include bilateral loan contracts and Paris Club agreements, bond issuances and multilateral loans -- to provide detailed analyses of these credits based on legal, economic and social and environmental impact considerations.

Ricardo Patiño, former Economy and Finance Minister and key backer of this initiative emphasized the word "integral" in a speech which launched the process in Guayaquil on 23 July 2007. "This will not be a simple financial audit of the debt," he said, "but will consider all relevant legal, political and economic factors which have led to the accumulation of illegitimate debt in this country. The audit commission must also consider social and environmental damages to local populations caused by debt. Debts which are found to be illegitimate must not be paid. Debts which are legitimate must be reimbursed," he said.

The commission has been divided into four "sub-commissions" to facilitate the audit process:

1. Bilateral debt
2. Multilateral debt
3. Bonds and commercial debt
4. Domestic debt

Eurodad has been designated as the international advisor and analyst on bilateral debt issues and has already begun to collect information from Ecuador’s Ministry of Economy and Finance. The Ministry has indicated that it will make available to commissioners all relevant documentation to support the investigative process. Ricardo Patiño indicated that he had already written formally to some banks and multilateral institutions to request supplementary documentation.

Bilateral debt: key facts

Of Ecuador’s $10.6 billion external debt burden, just over $2.1 billion is owed to bilateral creditors. Key bilateral creditors include Spain (US$396.8mn), Italy (US$340.4mn), Japan (US$300.3mn), Brazil (US$275.2mn), France (US$179.2mn), Denmark (US$158mn), UK (US$99.8mn).

Only US$1.27bn of a total of US$2.1bn in bilateral debt involves original loan contracts, however.

$882.4 million stems from several successive Paris Club renegotiations, commonly referred to as Paris Club V, VI, VII and VIII. The terms and conditions of the renegotiations will also be subject to close scrutiny by Ecuador’s debt audit commissioners to clarify -- and make transparent to the people -- the details of what remain to date very opaque and poorly understood decisions. Original loan contracts will also come under investigation and indeed inquiries have already begun into a number of Spanish, Italian and Belgian loan agreements.

The commission will meet once every quarter and will provide regular progress reports to the Ministry of Economy and Finance, and the Ecuadorian public.