Ecuatorian Debt Case Essay

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Background: Ecuador was another in the long line of Latin and Southern American countries attempting to deal with large levels of foreign debt. This debt was made up of loans taken out by the government of Ecuador other semi-government institutions in Ecuador (like utilities, railroads, etc.) during the late 1970s and early 1980s when the prospects for economic development in that part of the world were quite strong. Ecuador went to the international capital markets to obtain large quantities of capital, to speed up the rate of industrialization. The debt was in U.S Dollars. The internal and external sectors of the Ecuadorian economy did not grow sufficiently to generate the large amounts of foreign currency earnings (primarily dollars) needed for debt service over the1980s. As the debt crises of the early 1980s came and stayed, many of the commercial banks worked increasingly to either reschedule their loans to foreign borrowers (thus effectively redefining the loan as not being in arrears on servicing its obligations), or to rid themselves of their foreign debt assets completely. The Debt for Development Coalition, Inc. represents not-for-profit organizations committed to finding ways to turn the international debts of countries into economic development opportunities. The first and foremost concern on the part of an indebted country like Ecuador was that the debt and debt service be in a foreign currency, in this case U.S. dollars. This swap program would allow Ecuador to exchange Sucre debt for dollar debt. Problem: Jack the director of a university in the direction of foreign study programs has to decide whether to finance approximately $50000 dlls for the 1991-1992 school year in a debt for development program .This program allows the funds of the school invest in in program that would be give return from other educational

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