Rafael Correa, Ecuador’s leftwing president, pledged on Monday to move quickly to enact changes in the Andean’s nation’s 20th constitution, including the imposition of a new tax on mining companies.

Mr Correa said the proposed royalty of 3 per cent to 8 per cent on companies’ on production and/or sales was “urgent”. The tax, intended to develop an estimated $220bn in metals reserves, was low, Mr Correa said, but the constitution established that the state would receive at least 50 per cent of income generated by companies in natural resources.

The president did not rule out a default on the country’s $13.1bn in debt, saying the country may not repay debt it considers “illegitimate” as long as there is a legal basis to challenge that part of the debt. “To say no to debt without any kind of filter or discrimination would be a jump into the void,” he said.

Otherwise, Ecuador would continue to meet debt payments as long as it had the means to do so without threatening education budgets and social spending, he said.

Presidential and congressional elections are likely to take place next February, and many analysts predict that the country would be unlikely to default on debt before then.

But the economic outlook for Ecuador in 2009 is uncertain, as the country is more dependent than ever on oil revenues, which account for 35 per cent of public revenues, compared with 15 per cent last year. Mr Correa has also pledged to increase public spending at a time of slowing growth.

“I think Mr Correa is aware of the risks that a default would bring, but at the same time he’s holding true to his promise that a suspension of payments is an open possibility if the government runs out of cash and cannot fulfill what he likes to call Ecuador’s social debt,” said Patrick Esteruelas, Latin America analyst for Eurasia Group.

Ecuador’s constitutional assembly is expected to pick a committee from among its 130 members by the end of this week to function as a legislature before a new assembly is elected and takes office in the first half of 2009. Mr Correa’s Alianza Pais holds 80 of the assembly’s 130 seats.

Among the laws the administration is planning is a financial securities law that will establish a joint fund to safeguard against banking crises such as the one that hit Ecuador a decade ago, which cost it 21.7 per cent of GDP.

Mr Correa said the government also needed to spur growth in industry and agriculture as well as prepare the laws and staff changes to the Supreme Court, now demoted below a new Constitutional Court, and other bodies called for by the new charter.

Critics say the new constitution, approved by a majority on Sunday, gives the president an unprecedented level of power.

“We now have an executive that holds all the institutions of the newly structured state within its pocket. It is hard to imagine that this will result in less corruption and abuse of public office, and more prosperity and liberty for the majority of Ecuadorians,” says Gabriela Calderón, a Cato Institute researcher in Guayaquil.

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