Ecuador will make a $1 billion payment to American oil giant Occidental Petroleum by April, in keeping with a decision from a World Bank arbitration panel, President Rafael Correa said.
The International Center for Settlement of Investment Disputes (ICSID) initially ordered Ecuador to pay the company, known as Oxy, $1.77 billion plus interest in the 2012 ruling.
Correa in his weekly media address said that his government had managed to negotiate the sum down significantly, first to $1.4 billion, then eventually even somewhat lower.
"The award was $1.4 billion. We will pay roughly $980 million. The reduction is 420 million," he said.
Occidental, also known as Oxy, says Ecuador violated a bilateral investment treaty with the United States.
The leftist Correa originally sought to have the ruling annulled, saying the government was within its rights to cancel the contract because Oxy sold a 40-percent stake in the company to Canadian firm Encana in 2000 without its authorization.
Correa said in his radio address that in "a good faith gesture" Ecuador made an initial payment last month of 100 million dollars, and set up a payment schedule to complete payment of the balance by April.
"We signed an agreement with Oxy yesterday and we have settled the matter in an amiable way," he said.
The oil company sued Ecuador for $3.37 billion in May 2006, the day after the South American country announced the cancellation of a contract granting it the right to extract 100,000 barrels of oil a day from the Amazon basin -- about 20 percent of Ecuador's output.
The billion dollar payout adds to the budgetary woes facing Ecuador, the smallest member of oil cartel OPEC, amid falling crude prices and a depreciating currency.