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The country risk grew 102 points between January and March
Posted On 27 Mar 2018
Ecuadornews:
During the administration of Moreno the indicator has varied between 436 and 700 points. For tomorrow, the Government is expected to publish its economic program.
On the eve of the government finally disseminate its economic plan, scheduled for March 28, Country Risk (RP) grew 102 points so far this year, according to the Central Bank of Ecuador (ECB)
The indicator measures the compliance capacity of a country against its commitments, which sets a profile for investors.
The higher the score, the future debts will be more onerous, in addition a country could be declared in ‘default’.
Analysts warn that the country risk could increase if the government plan does not show clear and stable strategies that increase production, reduce the tax burden, open new markets abroad and moderate public spending.
They agree that the Government has postponed for a long time the announcement of the measures, after the popular consultation of February 4.
It is about moving to a scenario of “economic certainty,” described Larry Yumibanda, president of the College of Economists of Guayas. He suggested reducing a point of value added tax (VAT) in order to reactivate consumption.
In the case of Ecuador, Country Risk is influenced by the price of oil (the first source of resources) and the political climate.
Lenín Moreno’s administration started on May 24, 2017 with 650 points, from there it has fluctuated between 436 and 700 points.
At that time, WTI crude (reference for Ecuador) surpassed $ 50 per barrel. Yesterday, for example, closed at $ 65.49.
José Hidalgo, CEO of Cordes, attributed to this factor that country risk has remained at lower levels than in 2016, when the fall in oil deepened and the indicator reached 1,733 points.
In 2018 the RI grew 13 points when María Elsa Viteri was put in charge of the Ministry of Economy. Hidalgo said that it was the default effect that the country declared the debt in 2008, a process led by the minister.
For the director of Cordes, if the authorities do not allow greater participation of the private sector and the dynamics of creating more taxes is maintained, not only that the country risk will rise, but it will affect the activity level of the economic agents.
If country risk does not fall below its current level, when Ecuador intends to obtain financing, it will be difficult to find better conditions than the current ones with rates above 9% and at reduced terms, added economist Roberto Palacios, professor at the Polytechnic School of the Litoral (Espol) .
Ramiro Crespo, director of Analytica Investments, said that one of the first actions of the economic program should be to present to the National Assembly a plan for strengthening and sustainability because the State has exceeded the legal limit of indebtedness. (I)
