Ecuador on Wednesday promised to pay investors some of their money back on defaulted bonds in a move closely watched by the market because of its implications for other Latin American and emerging countries.

The buy-back offer is likely to involve a large so-called haircut of 70 per cent with the government expected to pay only 30 cents on the dollar. There was little reaction in the markets, although a decision earlier in the week by the government to service some of its debt has given support to its bond markets.