Take physic, pomp

Ecuador bonds update

Another bad haircut

According to an interview El Universo published today with Diego Borja, Studmuffin’s Minister of Public Economy, Ecuador is looking for a 70% haircut on the bonds buyback scheme. In other words, mark 30c to the dollar in your notebook. Here’s Reuters reporting the story in Spanish. As for the “if the bonds are supposedly illegal why pay a bean for them?” line of thinking, Borja lays down the official mental gymnastics by saying,

“…the buyback is a pragmatic solution in which the government recognizes that there are holders who are not guilty in this situation and will be affected.”

In other words, the debt is illegal but it might not be fair to pay nothing to the poor innocent bystanders that get caught in the crossfire of our crusade for justice an the nasty horrid kapitalist pigdogs (err…that’s us gringos) so we’ll pay a bit to everyone, even the pigdogs.

Or in other other words, Ecuador is about to be eaten for breakfast by Elliott Assoc and friends. If the whole line of reasoning for default is that the debt is “illegal” but then they offer to pay, that offer immediately dilutes their own defence. Meanwhile they have the money to pay 100% of the bonds face value and a straightforward court action is likely to go the defaultees favour.

These people are toast. They just don’t know it yet.

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