Ecuador Implications: A Region On The Ropes?

BMI View: Ecuador's outright suspension of external debt payments, which has triggered the first major default since Argentina in 2001, will inevitably put Latin America's sovereign creditworthiness under an unwanted spotlight. By and large, we reckon that the risks of a similar 'willingness to pay'-driven credit event in the region is limited. Nonetheless, as commodity price deflation, scarcer liquidity and a global recession pummel Latin America's economic outlook, the danger of further 'ability to pay'-borne sovereign defaults in 2009/10 should not be ignored.

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