The value of Ecuador's oil has dropped more than 70% in six months to trade at around $20 per barrel. Oil revenues finance nearly 60% of the country's budget.

You have to wonder what these guys were thinking. Did they really imagine oil prices would stay at 145, or go to 200? Even if they did, prudent management (especially when it's 60% of your budget) demands you sell forward a large part of production to lock in future revenue. It's absolute incompetence not to do that with prices over $100. Which is worse, to give up some potential gains and still meet your budget, or to have all your plans unravel because you didn't do a simple thing like hedge your risk? Someone really ought to be fired here. This is gross mismanagement.

Not to belabour the point, but I was talking about this very thing over a year ago - how they needed to fast-track mining to offset risk in their oil revenues. If they'd locked in a significant part of oil production on the way to 145, and at the same time fast-tracked mining to get some cash flow happening, they'd have had a stable revenue situation, albeit at somewhat lower levels until mining got up to full speed. Now look at them. It makes me sick after all the work I put into analyzing their situation. How is it that I can see this and they can't? What's wrong with these people? And to top it all off, they blow off the bond market in the midst of an international credit crisis? These guys are suicidal.

ebear