Ecuador Seeks Investors to Fund Hydro Plant

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QUITO – Ecuador’s economic policy coordinator said Tuesday that after a failed bid to secure a Chinese loan for a large hydroelectric project the government is now looking elsewhere for financing. Diego Borja said the government “is working with another group of investors,” adding that the methods of financing have changed and that funding does not have to come from “the multilateral lending agencies or from a single government.”

http://www.laht.com/article.asp?ArticleId=354217&CategoryId=14089

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My comment:

This is a highly irregular way to do business for a country, when the deal involves a $1.5 billion investment, they should have an international tender in which there are bids taken. The companies involved should fully disclose their background and capabilities, and their offers should be made public.

The tendency in these proto-communist regimes such as Ecuador and Venezuela is to deal with foreign corporations without transparency, in isolated negotiations which are kept away from the public eye. This lends itself to crony capitalism, corruption, and in the end can lead to serious losses for the nation.

Correa thought he was being pretty smart when he threatened bond defaults, then bough the Ecuadorian bonds at discount as the investors panicked. That was pretty smart - and unethical. So now it's payback time. The Chinese didn't trust him after he screwed the previous investors, including the Brazilians. And now the Ecuadorian government thinks they'll find a sucker or group of suckers to take the bait? I doubt it.

If a foreign consortium makes the deal, they're going to be putting steel hooks and chains so deep into Ecuador's flesh, that country is going to have a very hard time making sense out of the project. How would we know this? Because the Chinese are known to be loaded with US dollars, they are tough negotiators, had already won the bid to build the hydropower plant, and they couldn't close the financing. This tells me the Chinese were so wary of Ecuadorian betrayal, they must have insisted on very very tough terms and timing.

As they say in Chicago, what goes around, comes around.

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1. Maybe Chavez will send them the money

But I don't think he has it.