Rafael Correa has said Ecuador may not repay its international debts [AFP]

Ecuador filed an international lawsuit on Thursday to suspend payments on the loan from Brazil's development bank, alleging the terms are unlawful.

Rafael Correa, the Ecuadorean president, has warned the country may not repay "illegitimate" debt, as oil export revenues have been hurt by falling prices and the global financial crisis.

Correa said the results of a year long audit of Ecuador's debt found indications that much of the country's $10 billion foreign debt could be illegitimate.

Credit crunch

Celso Amorim, the Brazilian foreign minister, has previously warned that if Ecuador defaults on a loan from the BNDES, as Brazil's national development bank is known, it would end bilateral trade between the two nations.

"Whoever knows diplomatic practices knows exactly what this [recall] means," Amorim said in Sao Paulo on Friday.

"We have wide co-operation with Ecuador and we will examine this co-operation in light of these decisions."

Wall Street credit rating agencies have said Ecuador is among the least credit worthy countries in Latin America.

The country defaulted on $5.8 billion in bonds in 1999, also amid a sharp fall in oil prices.

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