The Ecuador bonds plummet on Monday after a partial recount of votes shows that the rejection of the questions presented by the pro-market president, Guillermo Lasso, is surprisingly winning in the popular consultation.
The bonds in dollars of the country posted the biggest declines in emerging marketsand notes due 2030 sank more than 7 cents to 62.3 cents, the biggest single-day drop since they were issued in 2020.
With 47% of the votes counted, a 54% majority rejected Lasso’s proposed constitutional amendment that allows the extradition of drug traffickers.
Ecuador launches a referendum on security, politics and the environment
The partial recount showed even larger majorities opposing the other seven proposals on security, the environment and a plan to reduce the size of the National Assembly. In addition, allies of leftist former president Rafael Correa, unpopular with investors, won or were on track to be elected mayors of key cities including the capital Quito.
“If the results hold up, it’s not a good result for Lassosaid Katrina Butt, emerging markets economist at AllianceBernstein in New York. “He didn’t have a strong mandate before, but outright rejection of questions that weren’t controversial will likely embolden the opposition.”
The success of Correa’s allies in several major cities adds to this risk, Butt added.
Ecuadorian bond yield depends on the stability of the country
rise in crime
Lasso had promoted the referendum as a way to allow the extradition of Ecuadorians to the United States., as part of efforts to combat the growing crime linked to cocaine trafficking. A series of prison massacres and a crime wave have caused his popularity to plummet recently.
“We note that following the election and referendum results, tail risks have been suspected, although we continue to believe that opposition incentives are not yet aligned to force an early departure for President Lasso,” said JPMorgan Chase & Economists. Co. Lucila Barbeito and Ben Ramsey, in a note on Monday.
He main risk the thing is new episodes of social protests trigger a scenario of political destabilization, added Barbeito and Ramsey.
You may also like
