Ecuador's foreign reserves drop as inflation rises

Ecuador's foreign reserves drop 26 percent in December, inflation hits 8.8 percent in 2008

QUITO, Ecuador (AP) -- Ecuador's foreign currency reserves fell 26 percent in December as the poor Andean nation maintains social spending programs in the face of falling oil prices, the central bank reported Thursday.
Ecuador now holds $4.5 billion in foreign reserves, $1.8 billion less than it held at the end of October 2008. The government projects a $1.5 billion deficit in 2009 because of low oil prices. Budget planners projected $85 per barrel but Ecuador's intermediate crude was trading at $26 a barrel on Thursday.

Oil is Ecuador's main export and accounted for 40 percent of the federal budget in 2008.
Boosted by high oil prices in the first half of the year, Ecuador's foreign currency reserves hit $6.5 billion in September, the most in eight years.
In other economic woes, the government announced that Ecuador finished 2008 with 8.8 percent inflation, a six-year high and more than double the country's 3.3 percent inflation rate of 2007.
High international fuel and food prices coupled with crop losses from heavy floods helped push inflation into the double digits by August, prompting President Rafael Correa to cap prices on some basic foods, prohibit rice exports and give subsidies and tax breaks to farmers.

Meanwhile, Ecuador's decision to partly default on and restructure its foreign debt has squeezed its access to international credit.
Analysts at Barclays Capital Research said Thursday that the depletion of government reserves also could be part of a Correa plan to buy back the defaulted bonds at discount prices. Ecuador plans to announce a restructuring package for the bonds this week.
Ecuadorean Fiscal Policy Observatory Director Jaime Carrera called the government's previous decision to lock social spending into the budget a "serious problem" due to the scarcity of credit and considers the planned $15 billion 2009 budget to be excessive.
Correa hopes to finance the deficit with credit from regional bodies like the Inter-American Development Bank and loans from Iran, Russia and China.

[ForexGen Demo Accounts Contest]

Win Cash Prizes

[ForexGen] has the pleasure to announce the launching of the Demo Account contest on the first of every month.

Interested clients who wish to participate in this event shall send an e-mail request on demo.contest@forexgen.com including the following information:
- Full name: - Phone number

Also provide us with the following identification document:
" Certified copy of the information pages of account holder current valid passport or government issued photo ID"
After we receive your request we will provide you with further details and with your [demo account] login information which will be used in the trading contest.

By the end of each contest:

1. All participants that manages to open at least 20 lots will be awarded a Live Account with $50 credit 2. All participants that manages to open at least 20 lots and keep their demo account initial balance will be awarded a Live Account with $100 credit 3. The highest 5 accounts with the highest profits (including the floating P/L) will be awarded a Live Account with $250 credit.

The contest starts on the first Sunday of each month at 10 pm GMT and ends on the last Friday of that month at 10 pm GMT.

For more information about our current and future promotions, kindly contact one of our customers support agents at promotions@forexgen.com