World Bank ban on Ecuador rep political statement

CAMBRIDGE, Massachusetts, Apr 28 (Reuters) The expulsion of the World Bank's representative from Ecuador is another political statement from President Rafael Correa, and the bank is still analyzing how to tackle the situation, one of its senior directors said.

There was no final straw in the tense relationship between the Andean country and the multilateral lender that could have explained the expulsion of the bank's official from Quito earlier this week, Executive Director Otaviano Canuto told Reuters in an interview.

''This is all part of Correa's political symbolism,'' said Canuto, who overseas nine Latin American countries including Brazil and Ecuador.

''But the bank's intention, I can assure you, is to remain engaged as much as possible in Ecuador to fulfill its mission, which is reduce poverty,'' he said in Cambridge, where he was attending an MIT conference.

Ecuadorean Economy Minister Ricardo Patino, explaining the expulsion, said yesterday the World Bank had infringed on the country's sovereignty by not providing a satisfactory explanation for suspending a 100 million dollars loan when Correa was economy minister in 2005.

Patino also said Ecuador wants to reduce its financial ties with the bank ''to the minimum.'' Canuto said the 100 million dollars loan had been promised to Ecuador as part of a program to support a specific government policy regarding the use of oil revenues to pay foreign debt. When the government decided to change that policy, the program automatically expired, he said.

''The country is sovereign and has all the right to change its policy but the project had been approved based on the old policy,'' Canuto said, adding that the World Bank tried to speed up the concession of other loans linked to specific projects in an attempt to fix the situation.

''But we could not carry on that project, because it no longer existed,'' he said of the 100 million dollars loan.

The World Bank is prepared to keep working on other financing projects with Ecuador, Canuto said, adding that the bank's director Marcelo Giugale had visited the country in February to offer financial aid to the new government.

Correa took office in January with promises to restructure the country's foreign debt. He does not rule out a moratorium on what he calls ''illegal'' debt. Ecuador owes around 750 million dollars to the World Bank, according to data from the Economy Ministry.

REUTERS JS KN2321