QUITO, Ecuador -- (AP) -- Many Ecuadoreans supported President Jamil Mahuad
 when he announced his decision last week to default on Ecuador's foreign debt
 payments. But Luis Davila wasn't among them.

 ``I don't think it's right. You have to pay back what you borrow,'' Davila, 68, said
 from behind the counter of his pharmacy on Avenida Amazonas in Quito's tourist
 district.

 ``It's not a relief for the country, as many think,'' he said. ``If we don't pay back
 what we borrowed, we won't receive new loans.''

 Most Ecuadoreans, however, don't realize the consequences of Mahuad's
 decision a week after this small, impoverished Andean nation of 12 million people
 missed a $44.5 million interest payment on its Brady bonds.

 Financial experts are painting a dismal picture of the future, predicting that
 creditors will try to make an example of Ecuador so that other Latin American
 nations with far greater debt won't follow suit.

 They foresee private lines of credit for Ecuadorean importers being cut and
 creditors initiating court actions to impound Ecuadorean property abroad,
 including the national airline's planes and the state oil company's tankers.

 One analyst said even the Ecuadorean Embassy in Washington might be seized
 by creditors.

 While Ecuador sought to win sympathy for its decision, key people said the
 government was largely responsible for the mess it is in.

 Timothy Geithner, undersecretary for international affairs at the U.S. Treasury
 Department, used a rare public appearance last week to make plain that
 Ecuador's crisis is one of its own making when he referred to countries that
 ``mismanage their economies.''

 The confrontation with foreign creditors was set in motion when tiny Ecuador,
 mired in its worst financial crisis in decades, became the first country to default
 on Brady bonds. The U.S.-guaranteed bonds, named after former Treasury
 Secretary Nicholas Brady, were issued in 1994 to restructure bad loans resulting
 from the Latin American debt crisis of the 1980s.

 On Friday, creditors rejected Ecuador's pleas for more time to renegotiate the $6
 billion of debt, demanding instead immediate repayment of $1.4 billion.

 ``Ecuador will pay what its economy will permit it to pay,'' Mahuad insisted
 Saturday.

 Finance Minister Alfredo Arizaga, who is deeply involved in the negotiations with
 creditors, says he is confident Ecuador will reach an agreement to restructure its
 debt -- but not without paying a price.

 ``I think the creditors will end up accepting a reduction of the debt,'' Arizaga said.
 ``But they want to send a very clear message to the international community that
 this is a special case and that they will not accept Venezuela, Mexico or Brazil
 following the same course in the future.''

 Mahuad last week announced Ecuador had signed a letter of intent with the
 International Monetary Fund that would initially bring in $400 million in badly
 needed fresh capital.

 But the agreement hinges on Ecuador's Congress approving Mahuad's proposed
 budget, which calls for increased taxes, reforms in the banking system and no
 deficit spending. Opposition parties control Congress and in the past have
 blocked Mahuad's reforms, especially attempts to raise taxes.

 Many political analysts doubt that Mahuad, a centrist with a master's degree in
 public administration from Harvard, will be able to win support for his spending
 plan.

 ``The country is not going to receive the resources it needs to control the
 economic tragedy that 20 years of government mismanagement has brought us
 to,'' said political analyst Mauricio Torres Toro.

 Past presidents have shamelessly doled out political patronage and cut deals
 with parties in Congress to pass laws, repeatedly approving deficit budgets.

 From small shopkeepers to factory owners, few in Ecuador pay taxes and no
 president has been willing to crack down on evaders. The government estimates
 that 80 percent of taxes are not paid.

 A recent international study listed Ecuador among the 10 most corrupt nations in
 the world and the riskiest for foreign investors to operate in.

 When El Nino-driven floods devastated agricultural production last year and
 dropping prices of oil, Ecuador's major export, the country entered what Mahuad
 has called its ``worst economic crisis in 70 years.''

 The economy is expected to shrink 7 percent this year. Ecuador's total public
 debt of $13 billion is predicted to reach 117 percent of the country's gross
 domestic product by the end of the year.

 ``It's obvious that the country can't pay the debt,'' said Blasco Penaherrera, a
 former vice president and ambassador to the Organization of American States.
 ``It's also obvious that we are the ones to blame. No one forced us to go into debt.

                     Copyright 1999 Miami Herald