GMO TRUST, on behalf of its series GMO EMERGING COUNTRY DEBT FUND Plaintiff, - against — THE REPUBLIC OF ECUADOR, Defendant.

GMO TRUST, on behalf of its series
GMO EMERGING COUNTRY DEBT
FUND
Plaintiff,
- against —
THE REPUBLIC OF ECUADOR,
Defendant.

Plaintiff GMO Trust (“GMO” or “Plaintiff’), on behalf of its series GMO
Emerging Country Debt Fund, for its Complaint against Defendant the Republic of
Ecuador (“Ecuador” or the “Republic”), alleges as follows:

NATURE OF THE ACTION

1. This action arises from the Republic’s failure to make interest
payments when due on the U.S. Dollar Denominated Step-Up Global Bonds due 2030
(the “Bonds” or “2030 Bonds”) issued by the Republic. GMO has held the vast majority
of its 2030 Bonds since their initial issuance, and as of the date hereof is the beneficial
holder of Bonds having a principal face value of $15,876,000. Plaintiff sues for breach of
contract, seeking damages based on Ecuador’s admitted failure to pay.
2. The Bonds were issued pursuant to an Indenture, dated August 23,
2000, between the Republic and U.S. Bank National Association, as Trustee, and
Citibank, N.A., as Paying Agent, Transfer Agent and Registrar (the “Indenture”). A true
and accurate copy of the Indenture is attached hereto and incorporated herein as
Exhibit A. Coupon payments are due on the Bonds every six months, in February and
August. However, Ecuador has refused to pay a single penny due on the Bonds since
February 2009.
3. Unlike other notable sovereign defaults, Ecuador’s was not driven
by a national economic or debt crisis. Indeed, just the opposite: when Ecuador issued the
2030 Bonds in August 2000, it had recently benefitted from an extensive debt forgiveness
and restructuring program that was aimed at making its national debt burden manageable,
supporting economic growth and permitting Ecuador to return to international capital
markets. This positive economic and fiscal picture still held when Ecuador defaulted on
the 2030 Bonds in 2009, when Ecuador had a growing economy, government revenues
buoyed by rising oil prices, and a manageable national debt level of approximately 20.7%
of gross domestic product (“GDP”). At or around the time of its initial default on the
2030 Bonds, Ecuador was reported to have approximately $5.65 billion in cash reserves,
and its debt service payments were reported to account for less than 1% of GDP.
4. Ecuador’s default on the 2030 Bonds came after the Republic’s
President declared that Ecuador’s foreign debt was “illegal” and “immoral,” and
selectively refused to pay the 2030 Bonds, and another series due in 2012—despite
Ecuador’s clear ability to meet its obligations, and without any legal or factual basis for
the denial of Ecuador’s obligations.
5. Tellingly, despite the purported immorality and illegality of its
entire stock of debt, Ecuador continued to pay on its remaining issuances aside from the
$3.2 billion in defaulted 2030 and 2012 bonds. This selective default has effectively
subordinated the.....

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