By JONATHAN FUERBRINGER

          As Ecuador begins the struggle to sell a restructuring plan for $6
          billion of its debt to global investors, Wall Street is calculating how
          much owners of this debt might lose. And, at the same time, investors are
          wondering whether this so-called haircut will set a precedent in future
          debt negotiations between troubled countries and private creditors.

          At issue is what former Treasury Secretary Robert Rubin called burden
          sharing, which is ensuring that private investors pay a larger share of the
          official bailouts of countries on the verge of collapse.

          The push for burden sharing began after the United States and the
          International Monetary Fund bailed out Mexico in 1995, saving many
          investors from huge losses. It picked up steam after the Asian financial
          crisis, during which the financial assistance from the United States and the
          IMF avoided or eased losses for many bondholders while local workers,
          who lost their jobs, suffered far more serious consequences.

          But while the Clinton administration Thursday expressed support for
          Ecuador's effort, a senior Treasury official indicated that the resulting
          burden sharing in this case should not serve as any precedent. "The
          market should not view Latin America or emerging markets generally
          through the prism of Ecuador," said the Treasury official.

          The official's comments indicate that the administration thinks Ecuador is
          a special case because its problems are atypical in Latin America. The
          comments also indicate officials don't want to be hemmed in by guidelines
          that would prevent them from applying burden sharing on a case-by-case
          basis.

          The IMF, which has been in talks with Ecuador on the bond restructuring
          and on an economic plan to help the country get back on its feet, was
          also supportive.

          One of the big concerns among officials and bondholders is whether
          Ecuador has the political will to make the policy changes, including
          spending reductions, to turn its economy around. Without a viable
          economic plan that is backed by the IMF and appears credible to
          investors, there is not much chance the country can work its way out of
          its current predicament.
 

          Ecuador's debt restructuring -- which could lead to the first-ever default
          on the popular Brady bonds that became the vehicle for restructuring
          debt in emerging market countries in the late 1980s -- got underway
          Wednesday night. In a nationally televised speech, President Jamil
          Mahaud said that Ecuador would delay for 30 days a $96 million interest
          payment due Tuesday and ask bondholders to swap their Brady bonds
          for new debt.

          Although the details of the swap were not given, Ecuador will ask
          bondholders to reduce the amount of money that the government owes
          them. Reducing its debt burden, including interest payments, is essential
          to any recovery. Its $13 billion in foreign debt exceeds size of its gross
          national product.

          Jose Louis Daza, managing director for emerging markets at J.P. Morgan
          Securities, estimates that Ecuador will seek debt reduction of about 30
          percent. In trading Thursday, Ecuador's three main types of Brady bonds
          were priced from 21 cents on the dollar 32.5 cents and down about a
          penny.

          Ecuadorean Finance Minister Ana Lucia Armijos was quoted by
          Bloomberg News as saying, "What we are doing with the Brady
          restructuring is asking bondholders to share the burden, as international
          organizations are doing through the granting of resources, as governments
          will do through the restructuring of Paris Club debt."

          The Paris Club is the group of nations, including the United States, that
          have made separate loans to the governments of many emerging market
          countries. Ecuador will also seek to get some debt reduction of the over
          $1 billion it owes the club.

          A senior Treasury official said the administration encourages Ecuador to
          work with the IMF on "a strong economic program that will lay the basis
          for stability and economic recovery" and to work with its private
          creditors to reach arrangements that "best satisfy their common interest in
          economic recovery." The official added that "on that basis we would be
          prepared to support an IMF program and a restructuring of Ecuador's
          debt to Paris Club creditors."

          This means the Treasury wants an IMF agreement before negotiations
          with Brady bondholders.

          Rubin brought burden sharing to the fore again in a speech last October,
          when the world financial crisis was at its worst and the Clinton
          administration was talking of a new international financial architecture to
          deal with such problems. "Private-sector burden sharing is critical," he
          said, "not only because there will not be sufficient official money for all
          circumstances, but also because it is absolutely essential in inducing
          market discipline."

          But since then, no one in the administration has set out guidelines for
          burden sharing. In April, not long before he announced his resignation,
          Rubin repeated the call but acknowledged that he did not know how this
          should be done. And it appears that the administration is still loath to set
          up any guidelines.

          One fact that may have been overlooked in all this is that the Brady
          bonds that Ecuador is trying to restructure already have been subject to
          burden sharing, as all Brady bonds were.

          The bonds, named for former Treasury Secretary Nicholas Brady, were
          designed as a way to repackage the billions in dollars of unpaid bank
          loans to many Latin American countries that effectively defaulted on them
          in the early 1980s. The repackaging into bonds made the old loans more
          attractive to investors because they could be traded easily and they came
          with various guarantees on the principal and interest.

          But the essence of the Brady bond program was the agreement by the
          banks to reduce the the amount of debt owed them by the countries, led
          by Mexico, Brazil and Argentina. For example, Mexico, the first country
          to negotiate a Brady bond deal, got a 35 percent reduction in the face
          value of its outstanding bank loans.

          Ecuador's Brady bond deal, which was issued in 1995, came with a 40
          percent reduction in its outstanding bank loans at the time.

          Another issue is what kind of impact the Ecuador restructuring will have
          on other Brady bonds.

          While any restructuring -- whether it results in default or not -- should
          have an impact on other countries' Brady bonds, it is hard at this time to
          measure. Daza said that one reason is that it is not clear yet how the
          restructuring will be done. A lot will depend on whether the exchange is
          done in what he called a "market friendly way."

          But so far the damage has not been that bad to other markets. According
          to J.P. Morgan's index of Latin American bonds, while the yield on
          Ecuador's bonds, compared with U.S. Treasury bonds, has skyrocketed
          since May, this so-called spread has stayed relatively stable on the debt
          of Brazil, Argentina and Mexico.

          And Daza said that he is surprised that the price of Ecuador's debt has
          not fallen further, given the clear threat of default. Therefore, he said,
          prices have further to fall.