Ecuador to Grow Up to 5% in 2009, Won't Use IMF Lines (Update1)

By Fabiola Moura and Jose Enrique Arrioja

Oct. 31 (Bloomberg) -- Ecuador's economy will grow 4 percent to 5 percent in 2009 on investment opportunities in the country even as global financial crisis unfolds, Economy Minister Pedro Paez said.

``The infection is outside, in the United States,'' and not in Ecuador, Paez said in an interview with Bloomberg Television in New York.

Ecuador's economy grew 1.87 percent in 2007, the slowest growth rate in Latin America, according to the country's central bank. In June, President Rafael Correa called for a review of how the bank reports economic data, saying its methodology doesn't accurately reflect the weight of the oil industry. The government forecasts growth of 6 percent or more in 2008.

Standard & Poor's said the minister's growth forecast isn't realistic given the decline in oil prices and changes to the constitution and mining and banking laws. Paez didn't say what opportunities would draw investors to Ecuador.

``Intuitively, that is not consistent with growth of 5 percent for next year,'' Lisa Schineller, an S&P analyst, said in an interview in New York.

S&P rates the country's foreign debt at B-, six levels below investment grade. Its growth forecast for Ecuador is about 3.5 percent for this year and 3 percent for 2009, Schineller said.

Rhetoric & Pragmatism

Correa won the presidency in late 2006 by promising a new constitution, approved in Sept. 28, to help alleviate poverty and put an end to the country's cycle of collapsing governments. He is an ally of Venezuelan President Hugo Chavez.

Ecuador, which borders Colombia and Peru, plans to avoid tapping emergency credit lines being offered by the International Monetary Fund and the World Bank as it distances itself from the U.S. and its allies.

``Due to ideological reasons, while these entities maintain their attitudes, I believe it is healthy to keep a distance,'' Paez said.

Ecuador would turn instead for additional funding to ``friendly countries'' like Russia, China, Venezuela and Iran, that are creating a ``security net for contingency lines,'' Paez said.

Ecuador will make social programs its spending priority at the expense of debt payments should the crisis have a bigger impact than expected, Paez said, echoing Correa's previous speeches.

``There is a blend of rhetoric and pragmatism, to some degree, in the Correa administration,'' Schineller said. ``As oil prices come down, as the global economy slows, clearly in terms of watching Ecuador's room for maneuver is something that we are increasingly doing.''

The country, a member of the Organization of Petroleum Exporting Countries, expects the price of oil to average $85 a barrel next year, Paez said.

That forecast ``is not consistent with our outlook at the moment,'' Schineller said.

Crude oil from Ecuador traded at $51.83 per barrel today at 2:32 p.m., according to Bloomberg data.

To contact the reporter on this story: Fabiola Moura in New York at fdemoura@bloomberg.net; Jose Enrique Arrioja in New York at jarrioja@bloomberg.net

Last Updated: October 31, 2008 16:17 EDT