Barclays on Venezuela

Here's the intro to a Barclay's report on Venezuela published yesterday (behind a paywall here):

During our recent trip to Venezuela, we met with officials from Banco Central de Venezuela (BCV), PDVSA, the Ministry of Finance, pollsters, and some independent economic and political analysts. Our target was to ascertain what could happen in 2010 with respect to credit (issuances) and to try to establish the implications of devaluation, the electricity crisis, the health of the financial system, the elections to the National Assembly, and other factors on Venezuela's economy.

Some of the highlights were that the shortages of the electric sector could have a higher impact on growth next year than this year. But oil production will not be affected by the electricity shortage, in our view. Additionally, authorities tell us that the government and PDVSA are not planning to issue in the coming months; however, we are less optimistic about what we heard, and we expect at least USD3.0bn of new issuance in the second half of 2010.

On the political front, most people we spoke to are of the opinion that the opposition and Chavistas are equal in the polls and that the National Assembly election will be straighforward, compared with the presidential election in 2012. Considering the fundamentals of the economy, its unquestionable capacity to pay, the positive effect of currency devaluation over fiscal accounts, and PDVSA's financial situation, we maintain our overweight recommendation on Venezuelan assets. But given that Venezuelan assets have already increased by an average of 8pp since the first week of December and the rise in the risk aversion sentiment in the market, our recommendation is less enthusiastic now. Basically, we have changed our recommendation from buy, buy, buy, on December 4, 2009, to just buy.

Money (Barclays) still talks and bullshit (O'Grady) still walks in this game. Ever wonder why TheFreeWorld™ rails against Venezuela but then says it's in good enough shape to invest in? I dare you to think about it.......all by yourself.......with no help from reading material.

Venezuelan finance quote of the day (perhaps even the year)

Alex Dalmady (of Allen Stanford whistleblowing fame) has nailed the subject of Venezuelan bonds with this post. I agree with his call and take the liberty of extracting this great little quote:

"Buying Venezuelan debt is like lending money to a wealthy, eccentric and partly insane uncle. You kind of figure he’s good for it, but there’s a good chance he’ll blow his fortune buying real estate on the moon or something and leave you hanging out to dry."

Go see the whole post for yourself. Top stuff

Venezuela Breaking News! Subversive German Bankers Topple TheFreeWorld™ Propaganda Campaign

Those pesky so-and-sos at Deutsche Bank have only gone and upgraded their recommendation on Venezuelan dollar bonds. And not only that, check out the reasoning. Here's Bloomie:

Aug. 27 (Bloomberg) -- Venezuelan sovereign bonds, the world’s highest-yielding behind Ecuador, were raised to “overweight” from “neutral” at Deutsche Bank AG because returns have become more attractive.

(DB wrote that) “The continued improvement in economic data gives justification for optimism”

CONTINUES HERE

Dammit guys, how the hell is the constant propaganda campaign about the imminent demise of Venezuela's economy supposed to work if you people start "investigating" and coming up with "facts"? You're going to have Moises Naim and Ricardo Hausmann phoning you up and giving you a mouthful today, I'd bet.

91%: Studmuffin pwns 'em all

Correa's role model

Maybe this is why The Hawaiian is getting all cuddly with Studmuffin...he wants to know how to get one over on WallSt in cool and definitive fashion. Oh wail ye captains of industry, the mouse has roared. Ecuador 1, World 0. I don't mind admitting that I didn't think he'd get away with this....pretty damned masterful play and I doff my cap to The Muffin.

Bloomie's Kueffner tells it better than I can and in fewer words, so here's his note:

Ecuador Buys Back 91% of 2012, 2030 Bonds in Default (Update1)

By Stephan Kueffner June 11 (Bloomberg) -- Ecuador bought back 91 percent of its defaulted bonds due 2012 and 2030 and will re-open its offer to bondholders who didn’t participate, Finance Minister Maria Elsa Viteri said.

Viteri disclosed the results today in Quito after the buyback offer ended on June 3. President Rafael Correa, who said in December that he was refusing to repay the $3.2 billion in bonds, was present at Viteri’s speech.

Viteri said 18.7 percent of the holders of the 2012 bonds didn’t participate, while 7.2 percent of the holders of the 2030 bonds didn’t take part. The government will offer these holdouts 35 cents on each dollar of the bonds’ face value, the same term as the initial offer.

She reiterated that Ecuador defaulted on the debt because it had evidence that crimes were committed in connection with its issuance.

To contact the reporter on this story: Stephan Kueffner in Guayaquil at skueffner@bloomberg.net

Latest on Ecuador's defaulted bonds buyback

So she ain't that pretty, but who cares? She got the full respected talent.
Maria Elsa Viteri, the Susan Boyle of Ecuador finances.

Yesterday we heard that Ecuador would pay 35c on the dollar to buy back the those defaulted Global 12s and Global 30s with the big day set for June 3rd. Today the news is that the tendering date has been put back to June 12th. According to FinMin Viteri, the extra nine days are to give more time for reflection to those holders she talked to yesterday that are still threatening to hold out. There's clearly a game of cat and mouse going on now, but I'd suppose the fact they're playing these chess games augers well for a happy MuffinEnding.

Meanwhile, Reuters reports the Global 2015s, those bonds originally threatened to be included in the default package but eventually allow to roam free and undefaulted, are now trading at 52.75c on the dollar (yield 24%)....quite a comeback from the 25c prices of December and January.

Down and Out in Paris and London and Quito

MEV doing her thing today

Maria Elsa Viteri is a busy lady. Ecuador's FinMin has today presented her 2008 fiscal transparency report which has lots of bits and bobs and technical stuffs (here's her full presentation, and it's pretty good in fact...Spanish language of course) but the one to take away for outsiders looking in is that the country's fiscal revenues are forecast to come up short by some U$1.34Bn to meet the U$14.1Bn 2009 expenditure budget. But not to worry, sez Viteri, cos loans from the Latin American Reserve Fund (FLR), the Interamerican Development Bank (BID), the Andean Development Corporation (CAF) and some tips thrown in from China and Iran will cover the gap.

Then MEV is off on a jolly jaunt to Europe (DJNW link) in the last two weeks of this month as she visits Paris and London to talk face-to-face with the holders of the defaulted bonds. She mentioned as a presser yesterday that Ecuador might be able to pay a tad over the 30c on the dollar that's the basline offer for the debt retirement, but there wasn't much cash around and any extra would be small. This has been taken as a softening of position by Studmuffin, as he's clearly given his right-hand-lady in all things economy a bit of room...not much, just a bit. However she also specifically said the payments would be on the principal only and no interest gets paid.

If you recall, Ecuador bondholders protesters-holder-outers made their first move last week, demanding full payment and interest. Let's see if MEV wins hearts and minds in Europe and heads those pesky vulture funds off at the pass. Watch this space.

"Psst! Wanna buy a Venezuelan gold backed dollar bond, guv?"

In Venezuela, there is mucho talk from mucho places about how the goverment is setting itself up to raise cash by selling (or attempting to sell) a new swathe of bonds to a willing world. This article in Bloomberg outlines the bureaucratic nuts'n'bolts filings that have taken place recently. Most intriguing are the manifold rumours swirling around about gold-backed bonds being emitted by CVG. There is a lot of confusion and the story is by far from definitive yet, but this (as far as I can work out) is the general scenario:

1) CVG is a quasi-state run company that operates heavy industry in the South of the country

2) The idea is for CVG to raise up to U$6Bn on dollar denominated bonds that will be backed up by gold production in the years to come.

3) Much the same way as the previous years' PDVSA bonds emissions, the bonds will be offered to Venezuelans via the private banking system. Citizens can pay for the dollar bonds using Bolivares Fuertes (VEF), probably paying a significant premium to the official 2.15/U$1 rate.

If it happens this way, the bonds will be wildly and incredibly popular with the local citizens. Even if the government makes people pay 3.0 for every bond-dollar, it's a big difference to the 6.50/6.90 spread currently offered by the parallel market. Or put theoretically:

• You buy a $1,000 dollar bond using VEF3,000
• The next day you sell that bond back to the banks for, let's say a 10% hairut. The bank gives you U$900.
• You run down the street and buy VEF5,850 with your dollars.

Now for sure the scenario isn't as smooth as that, but the theory will hold true even if the bank takes a more probable 30% haircut on the bonds (i.e. gives you U$700) and even if the parallel rate drops to VEF6.0 = U$1 (you finish with VEF4,200, which is still a nice day's work).

The question will then be "What do the local banks do with all their CVG dollar bonds?". These will be rather....hmm, how can we say this diplomatially...rather dubious financial devices in the end. Backing a dollar bond with revenue from gold that is still underground and mixed up in its mineral rock is a bit of a stretch, especially when you consider the dog's dinner that CVG has made of its non-production around the KM88 region so far this....well, this century, basically. Then there's the inflation in Venezuela and the way the local currency is fading against the dollar. A large lump of dollar debt may become rather difficult for CVG to service in the medium term and the local banks know it. They won't want to hold a stack of CVG dolalr bond paper in their safes, whatever nominal asset value may be printed on them

So Venezuelan banks will be keen to punt plenty of this paper on to other people. AND THAT'S WHERE YOU COME IN, GRINGOS! If all the above does come to pass as has been suggested by the Veenezuelan financial jungledrums, the world financial community will certainly get the "wonderful opportunity" to invest in "gold-backed dollar bonds" from Venezuela "at a considerable and attractive discount to face value".

My advice is that you should avoid such paper like the plague, as the buck has to stop somewhere. If...

• Venezuela is happy with its shiny new U$6bn in funds, and...
• Locals are happy to have made some coin from a quick flip, and....
• Venezuelan banks are happy to have made coin by punting the bnods off to foreign concerns...

...there has to be someone who pays for the party. Look in the mirror, blue-eyed-whitey. If all this happens, Venezuelan banks will be keen to offer any sort of arbitrage over the haircut offered to locals, so if you get the "$1,000 worth of dollar bonds back up by GOLD! for just $710" pitch, please don't go there.

However there is another side to all this. The Venezuelan government needs the cash, so it'll be keen to make this happen. So it must appease the local banks and make the deal profitable one for them, because otherwise it's not going to happen and Hugo&Co won't get their hands on the funds they seem to need (and with more than a little urgency, I gather). Therefore if the bonds deal doen't go ahead, the flipside is that Venezuela ill have to do something quick to shore up its finances. This mean...yep you guessed it...the deval. Thus watching the parallel market in the days and weeks to come will give you a very good idea of whether the government bonds deals will happen and, more importantly, whether they will be successful. Here's what the exchange rate looks like right now.


DYODD.

Ecuador Bonds: Game on

It took over four months for the Ecuador defaulted bondholders to make a move, but yesterday they tipped their card everso slightly. Reuters reported yesterday afternoon (Soto, natch) that they had got their hands on (i.e. sent by bondholders on a courier bike) a letter sent by the holders of a minor slice of the bond pie (estimated at $130m or above by Eurasia's Patrick Esteruelas). The letter had been sent to the government of Ecuador and requested the government to make good on the full amount of the bond capital and interest due.

Interesting that they should have waited until after the Presidential elections to make this opening gambit. This story is at the top of the second, approximately. Watch this space.

UBS is a bunch of know-nothings on Ecuador

The other day I said that UBS had been calling Mexico well. Unfortunately, UBS is as patchy on LatAm as the rest of them and just because they show a bit of smarts in one corner doesn't mean they can be trusted in another. Take for example this report dated March 24th that starts.....

"Ecuador will announce a restructuring of its defaulted debt this week, UBS AG said."

...... and compare it to this report dated March 28th that starts....

"Ecuador will unveil detailed plans on April 20 for restructuring its $3.2 billion in defaulted international debt, President Rafael Correa said."

Moral of the story: Just because you wear a suit and get a monthly paycheck for following LatAm affairs it doesn't mean you're not a dumbass. But fear not, because in the end Jesus loves us all.

Highly recommended article on emerging market bonds and possible sovereign defaults

Felix Salmon over at Market Movers has collared one of the Eurasia Group analysts, Ian Bremmer, and got some very good juice out of the guy about his worldview analysis of sovereign debt and the chances of seeing defaults in the foreseeable future. As EM debt is the subject there's plenty of LatAm talk, with Venezuela, Ecuador and Argentina on the menu as well as some of the smaller regional exposures. Eurasia is a touchstone for these issues and Bremmer doesn't disappoint. I'm particularly glad that he avoids wading into political marshlands and, in my view at least, calls Venezuela very sensibly.

This is great stuff for all LatAm watchers and highly recommended. I'm not pasting any extracts here, just go over yourself and read at source. Here's the link. Go.

Mixed bag of links

Naked Capitalism on the US banks. Yves Smith nails the current situation with this analysis. I do try to steer clear of all things non-LatAm on the blog, but this synthesis of recent happenings and the insight offered is too good to miss.

Bloomie's Kueffner on Ecuador bonds. Seems to me that the FinMin is trying its very hardest to delay any full-on confrontation with bondholders until after the April coronation of Studmuffin. BT, Kueffner is proof that Bloomie does have decent reporters..I tend to forget that sometimes.

Reuters on Argentine futbol. There's a big thing going on about Riquelme's decision to sulk in a corner. I'm happy that he's excluded himself from the side as we have a chance of winning the World Cup now (yeah...we).

Peru gov't getting in on the bailout act. Doe Run (those very polluting smelter owners East of Lima) have a serious cash crisis and the Twobreakfasts gov't is rushing to help. Doe Run has already laid off 1,100 workers at La Oroya....but don't let that worry you...move along now...nothing to see here....let's check those GDP figures again, yeah?

Argentina and the Call to Default

Eduardo Duhalde (for it is he)

If you read El Porteño's excellent post yesterday that explains the key present role of Eduardo Duhalde in Argentine politics, you'll understand that what follows is a very significant move towards Argentina defaulting in 2009 or 2010. If you haven't read it yet, here's the link again. You'll see just how important Duhalde is right now.

Now here's the crunch: Duhalde gave an interview on Argentine radio this morning and basically said that if all the rest of the world were in financial trouble and were defaulting on loans, they'd be stupid to pay up. Remember this is the most powerful man in Argentine politics outside of the Kirchner block and many expect the Duhalde-led pact to make a very strong showing in the 2009 end of year elections. Do not take Duhalde or his words today lightly; this is a serious call for Argentine default.

Here are some direct quotes from this morning's interview put through the Ottotrans™:

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"It's not that simple, this bill is not ours to pay. Latin America has to rebel like Africa and Asia. We have nothing to do with this. There's no reason why we should be hurt by this."

"The government does what it can (but) there is no deep analysis about what is happening."

"If the world is bankrupt, let's put our debt in with the others and see what happens later. What we have to do is take care and look after what is left of our reserves."

"It's very difficult and I don't think that much more can be done. The government has to think seriously in what I've said; this bill isn't ours to pay. This crisis was born in the USA, it hurts all of us and they have the chance to print money and save their own people. We don't have that opportunity.

"(During the Kirchner government) unfortunately they paid the U$9Bn dollars in IMF debt. It was announced in such a triumphant way that it was like Fidel Castro descending from the Sierra Maestra, when in fact it was stupid."

"That they now want to pay the Paris Club debt of other unnecessary highlights the fact that in this government there is no deep analysis about what is happening and what must be done."

UPDATE: Dear Mr. Dowsett, learn Spanish.

South American humour roundup

why so serious?

Joke one is from Ecuador, where FinMin Viteri yesterday announced that the 2015 Global bonds weren't under default after all and paid the necessary coupon. GPB at MktMemo sums it up nicely when writing "Don't expect bondholders to be as lenient with Ecuador as they were with Argentina a few years ago"

Joke two is from Argentina, as yesterday the Klishtina government had the brass neck to announce that Argentina's 2008 inflation came in at 7.2%. Triple that number and you're getting closer, according to anyone with a functioning brain that knows the country.

Joke three is from Venezuela, as Crystallex shareholders still believe their company has a future in the country's gold mining sector. Wrongo! The only future in store for KRY is centred on bankruptcy and civil litigation courtrooms.

Ecuador 14 January 2008: The Studfather

Note down 14th of January in your bizdiary, esteemed lector of IncaKuloNews.

• January 14th the most likely date for the second debate for Ecuador's new mining new is set to happen. Got the date, invitations have been sent out, the hall has been booked. The second report was approved 4-0 this afternoon (one abstention from the arch-socialist on the Congresillo). The law project now has to wait 48 hours for any observations to be added from third parties, then it must be debated in full session within five days. That means Friday is the limit, but word is that Thursday is the day.
  

• January 14th is the deadline that Studmuffin has given FinMin Viteri to announce how Ecuador wants to run its defaulted bonds buyback. She says there are still plenty of options on the table and is now working against the clock. Here's El Comercio with the whole story in Spanish (run it thru Google translator if you're Castilianly challenged).
  

More on the miners: As for ongoing rumbles and protests, yesterday was another day of skirmishes between anti-mining protestors and The Studfather's enforcement brigade. One journalist was taken hostage by the protestors for a while but then released. Sticks and stones were thrown at 20 cops until another 50 turned up and things went quiet. There is no big, organized voice-of-the-people against mining going on, but plenty of photo opportunities for the treehug brigade to take photos and handwring themselves into a frenzy.

The most notable absentee from the protests has been CONAIE national executive. The indigenous umbrella group has made anti-mining noises from the sidelines but hasn't actively joined in the protests. This is pretty significant, as although CONAIE has the manpower to help bring down governments if it wishes (check the history books for proof), it's also a canny operator and knows how to play the realpolitik game. There are enough indigenous members of CONAIE that want mining development to go ahead (those local groups have been hanigng round a welcoming Congress all week) and so CONAIE has backed off the full commitment protest, it seems. Put simply and without beating around the bush, this means the law is going to pass next week. Period. No ifs, no buts, no stupid comebacks from people who don't know about Ecuador.

From there we'll have a period of i-dotting-and-t-crossing and it should be on the books by the end of the month. Bought DMM.to today? Looks like somebody did!

another recommendation for the blog "Market Memorandum"

GPB has been doing a great job at his Market Memorandum of covering the swathe of sovereign bonds deals that have suddenly popped up all over the continent (and beyond, for that matter). This is one (just one) of the dude GPB's specialties in life and he knows the field backwards.

Here's the link to the latest overview post, but check the main page for the multiple reports already there and waiting for you. Great coverage of this new fashion in local finances, and recommended reading.

Also, as an added bonus I'm happy to say he's dumped the crappy dark template he was using and now has an easy-on-the-eye format.

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.

Crisis? What Crisis? (Ecuador edition)

After using the urinal next to Alvaro Uribe, Correa explains all

A shiver went down my spine this afternoon when reading this article posted on 'The Presidency of Ecuador's' website. It's not the country, it's not the President himself; it's the continent. One of the classic signals of real financial problems down this way is when the head honcho of country X says "There's no problem with our banking system." This time country X happens to be Ecuador.

So here below are the direct quotes by President Studmuffin in the report today (in OttoTrans). For the Bloomberg version by Stephan Kueffner, click here

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Nobody here is talking about a bank holiday (i.e. forced closure of banks). This government doesn't do things like that."

(These are rumours from).."those that sunk the country and want to become powerful again. We are not going to let that happen. The citizen's revolution is irreversible, friends."

"The financial system is in excellent health. Of course the financial crisis is harsh, but we know how to move forward with imaginative measures."

"When you hear an economic pseudoanalyst or editorial say that measures have to be taken now, what they are telling us is to send us a "paquetazo" (ottonote: literally "big packet", a concept in LatAm meaning a combined package of price and/or tax hikes). There isn't going to be a paquetazo. We are going to take advantage of this crisis and use it to make the social and econonic system more equal."

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Now there are things to agree with there (e.g. the rumour mongers that want to start some kind of crisis for their own ends...that's for sure). There are things up for debate (e.g. a more equal socioeconomic system sounds like Utopia to me, esp with crude oil at $40/bbl). But I wish he hadn't gone and said "The financial system is in excellent health". Uff........there goes my spine, all shivery again.

Ecuador bonds update

Today Ecuador formally defaulted on its 2012 bonds payment and FinMin Viteri also notified the world that they were defaulting on the 2015 bonds, too. Was the world shocked? Nope.

Right now the Global 2012 is printing 25.5c (on the dollar), the G2015 is at 24.5 and the G2030 is at 23.75. All those prices are above the panic sales of Friday afternoon when we saw 0.21 on the G12s at one point and they closed at 23c.

In other words, the world is hunkering down for the fight. Those that would take Correa&Co to court to claim full prepayment due to the lapse will buy these bonds at these prices, whilst those without the stomach for a drawn-out fight will sell, be done and move on.

Ecuador Bonds: Law, Justice and Money

President Rafael Correa of Ecuador has made a very, very big mistake.

The main problem on writing a blogpost about this subject has been where to start. The roots of Correa's decision on Friday go back to at least 2002 (according to all the literature I've read, anyhow...it might go back even further) with a series of papers written by Alberto Acosta when the phrase 'illegitimate debt' was first coined. Then there's the complexity of the issue, too. There are a lot of things that bonds market watchers instantly understand about the decision for a country with the means to pay to default on its obligations, but via IKN I try to stay away from long-winded technical stuff as much as possible. FWIW, check out Felix Salmon's post on the default that was written maybe three hours after the news hit, as on purely financial-head terms I agree with nearly every word written. Or as my own example I could get all wonky on you and explain why the 2012 will be the main battleground (for example that bond needs just 25% of holders to band together to start the legal proceedings rolling...others need 50%). But the nub of the issue lies in three basic themes, namely justice, law and money.

Justice: Correa believes he has justice on his side with his lapse into default on the Global bonds.

Law: The bondholders have the law on their side on same said issue. Little doubt on that score.

Money: Correa's call to default and then demand an a posteriori severe haircut on the bonds value is a big tactical mistake.

Inconsequential as they may be, I have my own views on these. Firstly, on the question of justice I think Correa has a good point. A very good point, in fact. The way that the bonds were first structured and then restructured leaves Ecuador bound head and foot. There are some very unfair clauses in the deals that restructured the previous defaulted bonds, including not allowing Ecuador to make prepayment or significant open market purchases at any discounted prices. These mean that Ecuador has to pay the interest, and pay, and pay and pay...not other way out. There are many other examples of the way the creditors screwed Ecuador back in 2001 and I suggest you check out the debt commission's finding for more information.

Is it injust that a small country such as Ecuador pays through the nose for its debt burden, and is hamstrung in such a way that it can't get out of paying? I say yes. I say it's a classic move by the big boy to keep the little upstart in a submissive position over a long period of time.However.......

The question of law is another thing altogether. The bonds were signed into a legally binding contract by both sides. They are covered by New York courtrooms. When the cases come up in front of the judge (and you can bet your house that they will) it's going to be a really straightforward call. Ecuador will be told to pay. Period. No doubts, no fuss, no waffle. From there it all depends on how Ecuador reacts to the order to pay. If it says "nope, won't pay screw you gringo", things such as embargoes, forced liquidations and such come into play. There are a thousand different ways for these things to play out, but as an example off the top of my head the New York courtroom could order a third party such as Peru to hand the money over it was about to pay to Ecuador for oil delivered. Suddenly the payment money is squeezed out of Ecuador's current account. Ugh.

Now for the issue of money. Let's put this in the most basic way possible.

1) You own bonds.
2) Ecuador defaults and then offers to pay you 20% of the bonds' face value.
3) Fairly straightforward legal action is available that will almost certainly go in your favour and you get to recover 100% of the bonds' face value.
4) Go on...take a wild guess..........

Correa's decision to default and then afterwards offer to pay a small percentage of the bonds' face value is naive. It's bad poker. If he'd decided to take the whole shebang to court as recommended but for the time being paying the due coupons and keeping the country out of default, this line would have some credence. Frankly this is what I thought he'd do; I mean, we're talking $30.6m here. That was my mistake. That's the kind of money you lay down to try and win a $3.9Bn jackpot, no? But he's just being silly here, sad to say. This is not realpolitik. He said that he prayed to God before making his final decision, and who am I to doubt. But I also think he read that John Perkins book once too often.

It may not be pretty and it may not be "fair", but it's Kapitalism, baby. It sucks on many levels but Ecuador is now running headlong toward serious economic and therefore social problems. I wish Correa the best of luck with what he's trying to do. Depending on one's point of view, justice is his main weapon (personally I think justice is on his side, here). But be clear; he's trying to do something that has been tried many times before and has never worked. Not once. He's also trying something that will likely lead to the end of his Presidency. That's a real pity, cos I think he's good for Ecuador and a damned site better than the establishment leaders who are now rubbing their hands with glee and counting down the days before they get their corrupt hands back on the reins of power.

Ecuador bonds: the build up to Saturday

The professional arm-wrestling circuit reaches Paraguay

Here we go with the rumour-mill that presages Saturday's big final announcement from Studmuffin on whether Ecuador is going to pay the nasty coupon on their nasty illegal debt.

This morning El Comercio reported that Ecuador has bought back $680m of its own bonds, its source being....errr.....someone. The idea is that the bonds are dirt cheap right now and they can retire their own debt for relative peanuts. This was one of the original conspiracy theories about the whole thing, if you can remember back that far. Here's Bloomie on the story:

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Ecuador Bought Back $680 Million of Bonds, El Comercio Reports

By Stephan Kueffner

Dec. 11 (Bloomberg) -- Ecuador has bought back $680 million of its debt through a state-owned bank, Quito-based newspaper El Comercio reported, without identifying the source of the information.

State-owned Banco del Pacifico managed the debt repurchases after the government skipped a $30.6 million interest payment on Nov. 15, invoking a 30-day grace period, the newspaper reported.

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Remember scandalfans, Saturday December 13th is the big Muffin annoucement day during his weekly live radio/TV show. Be there or be square.