EM LATAM CREDIT: Republic of Ecuador (ECUA; Caa2 /B-neg /CCC+): Coalition

Support from Pachakutik party in the national assembly: Positive

• Assembly members aligned with the left leaning indigenous people’s party Pachakutik agreed to cooperate with the government of recently re-elected market friendly president Daniel Naboa.

• The leader of the indigenous people’s party, Leonidas Iza, vehemently and publicly objected to the agreement. Iza captured 5% of the February first round presidential election vote, far third behind the two leading candidates who each got 44%, but the largest share compared with all the other candidates so that made him influential at a time when people expected a close second round vote.

• President Naboa won 55.7% of the second-round vote in a surprisingly strong victory of 11 percentage points over his opponent Luisa Gonzalez. He has a formidable challenge ahead in improving security as well as improving economic conditions and shoring up government finances.

• Government minister Jose De La Gasca announced the agreement on his Instagram account, posing with 7 of the 9 assembly members. With the support of those 9 assembly members, Daniel Noboa’s ADN party will likely have a sufficient majority to to appoint the president of Parliament, according to local news outlet Expreso.

• Getting legislative support is a positive step forward in passing necessary economic reforms, especially those agreed to by the IMF who approved a USD4bn 48 month extended fund facility last year, of which USD1.5bn has already been drawn.

• Among other obligations and a fiscal deficit to finance, Ecuador has a sinking fund payment due in January of USD370mn.

• The fiscal deficit was 1.8% in 2024, expected to improve to -1.3% in 2025 according to the IMF. Ecuador has USD7.6bn of gross international reserves with the IMF projecting USD10.5bn for 2025.

• The country had the 4th largest oil reserves in Latin America according to the US Department of Energy. Exploiting those resources will be an important part of the economic solution.

• ECUA 6.9% 2030 were last quoted USD76.15, up 1.8 points today, about 17 points higher MTD and 6.5 points higher YTD.