Ecuador’s country risk climbed 295 points and is now at 1,415 points, after the 2023 elections

This Monday February 6, 2023, the country risk in Ecuador was placed at 1,415 points, that is to say, 295 points above what it had before the elections. This indicator was reported by Invenomics, based on the EMBI indicator, Published by JP Morgan.

The increase of country risk, after the electoral process and the adverse results to the government of Guillermo Lasso, it is a predictable result. The problem is that these The results mean that there will be greater political ungovernability, indicates Jaime Carrera, Executive Secretary of the Fiscal Policy Observatory.

And he adds that this opens the door to uncertainty about whether or not the mandate will end, it will also bring total obstruction to any reform, and with all this impossibility of attracting investment. Additionally, there is the danger that the already restructured external debt will not be paid.

Furthermore, he considers that a The new Citizen Participation Council, similar to Correísmo, will generate governance problems, as well as the sources of protest that the indigenous will generate.

“The government in Ecuador was already weak and now it will be even weaker,” he says. All these problems generate fear in international markets of non-compliance with their obligations, and therefore the country risk rises.

Country risk is an indicator that also serves to establish the price of international financing for Ecuador. Thus, with a risk of 1,415 points, the interest rate for external debt could not be below of 18%. Country risk also affects the financing that companies and banks could seek abroad.

Ecuador’s is the fourth highest country risk in the region, since in first place is Venezuela with 37,891 points, followed by Argentina with 1,917 points and El Salvador in third place with 1,418 points.

Meanwhile, investment banks and international analysts also expressed concern about the results. For example, the investment bank JP Morgan has published in a report that “after the results, the risks (in an early termination of Lasso’s mandate) have increased.”

JP Morgan believes that the opposition is not aligned so that the Lasso government ends its term. JP Morgan considers that the good performance of the correista movement in the February 5 elections and the possible defeat of the “Yes” in the referendum, leaves a “very challenging political scenario” for Lasso, as reported by the portal Primicias. (YO)