(Bloomberg) - "Venezuela will offer Ecuador as much as $500 million of 'financial cooperation' assistance that could include buying new Ecuador bonds or extending credit to the Andean nation.

Ecuador's recently elected President Rafael Correa, a close ally of Venezuelan President Hugo Chavez, has threatened to default on his country's $10 billion foreign debt so he can divert funds for welfare programs modeled on those Chavez introduced.

Correa's government on Feb. 15 met the first $135 million interest payment of his term, signaling that internal political struggles, including a bid to rewrite Ecuador's constitution, may postpone the restructuring plan.

'Ecuador doesn't have a short-term problem paying its debt, but we're offering to help anyway,' Venezuela Finance Minister Rodrigo Cabezas told reporters in Caracas. 'We're talking about $500 million over 2007 and 2008'.

Venezuela has used record oil income to provide aid to allies throughout the region, including Nicaragua, Bolivia and Argentina. The Chavez government, which in December agreed to refine Ecuador 's crude oil for free and help develop natural gas and energy industries, may now help Correa follow through on debt restructuring".