Ecuador Internacional

Bailout Risk Grows for Ecuador After Worst Earthquake in Decades

Bloomberg - Nathan Gill 20/04/2016

Before a 7.8-magnitude earthquake struck Ecuador on Saturday, the South American nation’s finances were already in tatters as the government struggled to meet payments to municipal authorities, oil companies and even cancer hospitals. Cut off from global bond markets, President Rafael Correa must now find enough money to rehouse thousands.

As volunteers continue to rescue victims from the rubble of collapsed homes and buildings on Ecuador’s Pacific coast, doubts are growing about the country’s ability to pay for the reconstruction. The nation is already in its worst recession since the financial system collapsed in the late 1990s, and international reserves are at their lowest levels in almost seven years.

The damage, which left at least 433 people dead, 231 missing and more than 4,000 injured, may cost between $15 billion and $30 billion to repair, based on estimates of losses from the 2010 earthquakes in regional neighbors Haiti and Chile, said Edward Glossop, an economist at Capital Economics. The disaster will probably deepen the recession, forecast by the International Monetary Fund to reach 4.5 percent this year, and recovery efforts will be hobbled by the lack of savings, he said. Correa said Tuesday reconstruction may cost as much as $3 billion and cut gross domestic product by up to 3 percentage points, according to Sky News.

“It just makes the task even harder,” Glossop said Monday in a telephone interview from London. “You will need even more funds to be able to finance new construction work that needs to happen in order for the economy to recover from the earthquake.”

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