Event

Lenín Boltaire Moreno, the leftist candidate, has claimed victory in the second round of Ecuador’s polarising presidential run-off. He is the anointed but less charismatic successor to President Rafael Correa who is legally barred from running again after ruling the country for a decade. However, the result is very tight and not yet final. With 99% of votes counted, Moreno has 51% of the vote while his rival, conservative banker Guillermo Lasso, has 49%. Tensions were already high following the first-round vote two months ago, when it took three days to declare that a run-off between Moreno and Lasso would take place. Therefore, not surprisingly, Lasso is challenging the result while many of his followers took to the streets.

Impact on country risk

The election results, if final, prelude the continuity of the ‘citizens’ revolution’, declared a decade ago. Moreover, it defies a regional swing to the right-leaning governments which recently came to power in Argentina, Brazil and Peru as the commodities boom ended. However, the continuity of the leftist policies will be more difficult than a decade ago. Firstly, Moreno will have trouble to continue the growth policies based on recycling oil revenues through government spending as oil prices are expected to remain relatively low. Indeed, the country is in recession since 2016 and recovery is not expected in the medium term (also in 2017 a contraction is forecasted of about -2.7%). Moreno also promised to increase public spending and continue the social programmes of his predecessor which contributed to slashing poverty rates. However, the structural fiscal deficits in the past eight years doubled government debt (at almost 40% of GDP by the end of 2016) and can also make this pledge challenging. Financing further fiscal deficits will especially be tricky since Ecuador has limited access to external financing due to its history of sovereign defaults. Another difficulty will be to crack down on graft and governing amid corruption scandals at state-run oil company PetroEcuador and allegations related to bribes of Brazilian conglomerate Odebrecht. Finally, Lasso is also expected to continue to oppose the election results which can trickle into political unrest.

Analyst: Jolyn Debuysscher, j.debuysscher@credendo.com