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To: lorne who wrote (23782)	12/3/1998 5:25:00 PM
From: Alex	Respond to of 116762

I.D.E.A. Global Focus Dec 3 1998 2:35PM CSTArchives... Latam Focus -- Ecuador moving towards meltdown Ecuador's president Jamil Mahuad declared a state of emergency Wednesday in an effort to secure a loan from the central bank. Political bickering over his decision should put pressure on the sucre and the country's Brady bonds. In normal circumstances, the constitution denies the government the right to borrow money from the central bank. But the cash-strapped government needs money to pay public-sector salaries, many of which are way past due. It also needs money to service debt. Political tensions are heating up throughout the country. The central bank and Mahuad are battling over the legitimacy of the government's move. The central bank sees the move as a threat to its autonomy and is claiming that the government cannot declare a state of emergency in the current atmosphere. The country is not at war and is not being battered by a natural disaster. The government used the continuing damage from El Ni±o as justification for its decision. But El Ni±o is no longer hampering the local economy. Meanwhile, opposition party members in congress are busy making noise about the past-due public sector salaries. They are threatening to impeach finance minister Fidel Jaramillo. Tensions in congress should make it difficult to pass any economic reforms. Mahaud managed to push through most of his economic reforms with relative ease. But important measures that would help open the petrochemical industry to foreign investment have yet to be submitted to congress. InterMoney thinks Mahuad should not have declared a state of emergency. It sets a dangerous precedent and threatens the credibility and independence of the central bank. Dollar/sucre rose to 6,610 from 6,556 Thursday. It could head towards the top of its currency band at 7,008 to the dollar. The Ecuadorean Brady bonds have been the worst performers in Latin America Thursday. The Ecuadorean par widened 183 basis points over Treasuries to 21.34 percentage points over Treasuries. The price of the par is off 9.45% to 45.5 this week alone. It could drop to 42.62 in the short term. The Ecuadorean PDI widened 71bp to 13.02 percentage points over Treasuries. It has been the worst performer in Latin America this week, losing 16.95% to 42.31 since Monday. It could fall to 40.00 in the short term. wallstreetcity.com