Ecuador is one of the foremost serial defaulters in the world. When it defaulted on bank loans in the 1980s, the debts were restructured into Brady bonds. When it defaulted on its Brady bonds in 1999, they were restructured into new global bonds, maturing in 2012 and 2030.

Now it's defaulted on those global bonds—although not on its third global bond, maturing in 2015.

Ecuador has hired Lazard Freres as an adviser, and is rumored to be planning a tender offer where it will attempt to buy back its defaulted debt at around 30 cents on the dollar.

Abby McKenna, a fund manager at Morgan Stanley Investment Management, is a co-founder of the Emerging Market Creditors Association, which was set up in the wake of the last Ecuadorian default.

Here, she and her colleague Federico Kaune explain why they think any unilateral tender offer is doomed to failure, and why Ecuador should start talking to its creditors instead.

—The Editors

President Correa's efforts to restructure Ecuador's sovereign external bond obligations have rightfully caused concern among the country's international creditors. Their disquiet stems from two facts: first, that significant debt forgiveness has been granted on numerous previous occasions; and second, that Ecuador is solvent with sufficient liquidity to honor its international commitments.

Creditors correctly believe that Ecuador's decision to default reflects its lack of willingness to service its debts, not its ability to do so. Unfortunately, for other Latin American borrowers, Ecuador's ill-conceived actions reinforce negative stereotypes about Latin America and its attitude toward debt. These actions will taint other borrowers and cause investors to reassess levels of risk within the region.

Equally concerning is President Correa's disregard for the rule of law and his claim to lack any understanding of international capital markets. The President would have us believe that Ecuador lacked the intellectual capital, over a number of decades, to understand the fundamental underpinning of a contractual agreement.

The government argues that weak institutions and rampant corruption led Ecuador to acquire excessive levels of public debt, making such debt illegal and illegitimate. The government relies on its own "expert" debt commission report, which attempts to shift the blame for Ecuador's debt problems abroad to the U.S. Federal Reserve for interest-rate hikes in the early 1980s, to its creditors for capitalizing unpaid interest, and to its lawyers for allowing Ecuador to submit to New York legal jurisdiction.

The president has also argued that because the bond contracts were drafted in English, they were too difficult for Ecuadorians to understand, and therefore illegal and illegitimate.

The law is clear that debt cannot be deemed illegitimate simply because the borrower claims not to have benefited from it. Bond investors did not bribe, trick, or force Ecuador to borrow funds in international capital markets.

New York law is also clear that issuers can neither manipulate market prices nor buy back debt at distressed prices with the intent of using the bonds to affect a coercive debt exchange. This is something Ecuador's creditors will surely examine more closely over the next few weeks and months.

A bond is a legal contract in which a borrower is obliged to repay principal and interest to the lenders (bondholders) at a later date. The most important part of the contract is the borrower's commitment to repay the lender.