Ecuador’s country risk improves and falls 89 points in two days

Ecuador’s country risk indicator has fallen 89 points between November 20 and 21, 2023. Thus, the indicator stood at 1,921 points at the end of the day on November 21.

A high country risk reflects that foreign debt creditors and international investors perceive that there is a greater probability that a State will not pay and fall into what is known as default

The fall of the indicator is registered in the midst of some changes in the political aspect . The most recent is the confirmation that Sariha Moya will not be Daniel Noboa’s Minister of Finance .

Noboa has not yet confirmed who will replace her, two days before the change of command. However, entities such as the investment bank Barclays consider that the news is not worrying if the replacement is someone with more experience than Moya.

Another factor that could have influenced the drop in the country’s risk is that on Sunday, November 19, the 15 legislative commissions were formed in the Assembly, without major setbacks , thanks to the new majority made up of the Citizen Revolution, the ADN alliance and the Social Party. Christian (PSC).

This showed that the first agreements between the groups were reached , which could help to achieve greater governability than the one Guillermo Lasso had.

With this, Correismo took over the presidency of six of the 15 commissions , the Government bench (ADN) took five and the PSC took the remaining four. In the Justice, Economic Regime, Economic Development and Supervision commissions, Construye did not have a single space.

A third factor that could have contributed to the fall of the indicator , especially on November 20, 2023, is that that day the price of WTI oil increased by 2.3%.

Because oil exports are an important source of income for the General State Budget , when the price of a barrel increases, there is less uncertainty in the markets regarding the country paying its debts.

Ecuador is fourth in the region

With this reduction, Ecuador is in fourth place among Latin American countries with the highest country risk and no longer in third place, which it had occupied until November 17.

Thus, the countries that are above Ecuador are Venezuela (18,074) , Argentina (2,246) and Bolivia (1,982), until November 20.

Ecuador’s indicator exceeded 2,000 points on November 14 , after the president-elect, Daniel Noboa, told investors and multilateral representatives, during a tour in the United States, that it is possible that the country could fall into default and called for a bridge loan.

Investors remain fearful

But why is Ecuador’s country risk the fourth highest in the region ?

According to a report from Santander US Capital Markets LLC, the first lights of Noboa’s economic plan are not encouraging, since it seems that the new president does not plan to make fiscal adjustments that reduce the risk of default.

Hence, this investment firm considers that Ecuador, along with Argentina, are countries with the highest probability of non-payment of their debt.

The country risk could have new changes on November 21, 2023, after it was confirmed that Sariha Moya will no longer be Noboa’s Minister of Finance.

For Alejandro Arreaza, economist for the Andean region at the Barclays investment bank, the change of minister should not worry the markets if the new profile is someone with more experience than Moya.

Changes on the political board also influenced Argentina’s country risk . After the victory of the far-right Javier Milei in the presidential elections on November 19, Argentina’s indicator fell 170 points and stood at 2,246 on November 20.

Milei has offered to dollarize the Argentine economy , which suffers from high inflation. He has also said that he will eliminate the Central Bank and aggressively cut state spending.

https://www.primicias.ec/noticias/economia/riesgo-pais-reduccion-atrabajos-asamblea-daniel-noboa/