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Ecuador’S Country Risk Plummets After Election, But Challenges Remain
(MENAFN- The Rio Times) Ecuador's country risk index dropped to 1,282 points on April 14, 2025, after President Daniel Noboa secured re-election, according to the Central Bank.
This sharp fall, the largest daily drop since Ecuador adopted the US dollar in 2000, signals renewed investor confidence. The index, which measures the extra yield investors demand to hold Ecuador's bonds over US Treasuries, had stood at 1,844 points just days before the runoff.
Investors responded to the election outcome and the government's pledge to stabilize public finances. The Central Bank's manager, Guillermo Avellán, said the result reflected a perception of lower risk.
He noted that the government's efforts to meet external obligations and maintain fiscal order played a key role. The country risk index matters because it directly affects Ecuador's borrowing costs.
At 1,844 points, Ecuador would have faced interest rates up to 23% on international loans. The new level allows the country to seek financing at more favorable rates, which could boost public investment.
Despite the improvement, Ecuador' risk remains high compared to most Latin American countries. Uruguay, Chile, and Peru all post risk levels below 200 points. Even Argentina, long seen as a risky borrower, now sits below 1,000 points.
Only Bolivia and Venezuela have higher risk in the region. Ecuador's fiscal deficit narrowed from $5.7 billion in 2023 to $3.1 billion in 2024, but much of this came from temporary tax hikes and planned subsidy cuts.
The deficit is expected to widen again in 2025 as these measures expire. Security concerns and political instability have also weighed on investor sentiment. Rising violence and recent high-profile criminal incidents forced the government to increase security spending.
Oil prices and production disruptions, such as the March 2025 Esmeraldas oil spill, continue to impact government revenues. The IMF forecasts Ecuador's economy will grow just 1.2% in 2025, the slowest in South America.
Ecuador's improved country risk opens the door to cheaper financing, but the country must maintain fiscal discipline and political stability to sustain investor trust.
The story behind the numbers is clear: Ecuador has made progress, but significant challenges remain before it can fully regain market confidence.
This sharp fall, the largest daily drop since Ecuador adopted the US dollar in 2000, signals renewed investor confidence. The index, which measures the extra yield investors demand to hold Ecuador's bonds over US Treasuries, had stood at 1,844 points just days before the runoff.
Investors responded to the election outcome and the government's pledge to stabilize public finances. The Central Bank's manager, Guillermo Avellán, said the result reflected a perception of lower risk.
He noted that the government's efforts to meet external obligations and maintain fiscal order played a key role. The country risk index matters because it directly affects Ecuador's borrowing costs.
At 1,844 points, Ecuador would have faced interest rates up to 23% on international loans. The new level allows the country to seek financing at more favorable rates, which could boost public investment.
Despite the improvement, Ecuador' risk remains high compared to most Latin American countries. Uruguay, Chile, and Peru all post risk levels below 200 points. Even Argentina, long seen as a risky borrower, now sits below 1,000 points.
Only Bolivia and Venezuela have higher risk in the region. Ecuador's fiscal deficit narrowed from $5.7 billion in 2023 to $3.1 billion in 2024, but much of this came from temporary tax hikes and planned subsidy cuts.
The deficit is expected to widen again in 2025 as these measures expire. Security concerns and political instability have also weighed on investor sentiment. Rising violence and recent high-profile criminal incidents forced the government to increase security spending.
Oil prices and production disruptions, such as the March 2025 Esmeraldas oil spill, continue to impact government revenues. The IMF forecasts Ecuador's economy will grow just 1.2% in 2025, the slowest in South America.
Ecuador's improved country risk opens the door to cheaper financing, but the country must maintain fiscal discipline and political stability to sustain investor trust.
The story behind the numbers is clear: Ecuador has made progress, but significant challenges remain before it can fully regain market confidence.
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