The bonuses of Ecuador widened their losses after the president Daniel Noboa made an unexpected change in the leadership of the Ministry of Economic and Productive Development.
Securities maturing in 2039 fell US$0.023, to US$0.929 per dollar in face value, after Noboa formalized on Monday through an executive decree the replacement of Sariha Moya, who had managed the country’s finances for more than two years, by a little-known official.
Bernardo Cordovez will replace Moya at the head of the ministry, whose functions were recently expanded. The new minister previously chaired the Board of Directors of the Ecuadorian Institute of Social Security, a major investor in local bonds.
Noboa said to Bloomberg Television last week that Moya would meet with fixed income investors in New York on the sidelines of the General Assembly of the United Nations.
“It is unknown why they replaced Sariha Moya“, he pointed out Ramiro Blazquezstrategist StoneX Securities. But “with fiscal uncertainty and El Niño just before the elections, it is not reassuring news.”
He Ministry of Economic and Productive Development did not immediately respond to a request for comment.
Moya He headed the portfolio since April 2024 and was the second person to hold the position under Noboawho was elected at the end of 2023.
During his management, the International Monetary Fund expanded a financing deal from $4 billion to about $5 billion as the president negotiated the elimination of costly fuel subsidies. Moya He also oversaw the return to international debt markets with a record $4 billion issuance in January, five years after a restructuring carried out during the pandemic.
But in June, Noboa he reduced his cabinet and expanded the ministry’s functions beyond finance and the economy to include foreign trade, agriculture and tourism. Since then, it has been renamed Ministry of Economic and Productive Development.
Although the president has taken steps to strengthen finances with the guidance of the IMF, Cordovez faces significant short-term challenges and the market is taking note.
Ecuadorian bonds reversed strong gains amid rising fuel subsidies as the war with Iran intensified pressure on diesel prices. Local oil production, meanwhile, continues to decline and demand exceeds local refining capacity.
In addition, a strong El Niño phenomenon has already begun to cause flooding in some low-lying areas of the Pacific coast. That threatens to cause significant damage to infrastructure and key exports such as shrimp and bananas. In the high Andes, it could lead to drought conditions like those in 2024, which caused widespread blackouts due to the country’s heavy dependence on hydropower.
“Ecuador is definitely among the countries that could be most harmed by this,” he said. Gorky Urquietahead of emerging market debt at Neuberger Bermanin reference to El Niño.
Ecuadorians will also elect local and provincial authorities in November. With the country mired in a security crisis that has turned it into one of the most violent places in South America, polls show high levels of indecision.
The strategist of Barclays Jason Keene last week it lowered its recommendation on Ecuador due to increased spending on subsidies and the arrival of El Niño towards the end of the year. The country’s worst bonds have lost 4.5% this month, the second-highest performance among emerging-market sovereign debt, according to an index of Bloomberg.
Energy issues and “political incentives” ahead of the next election suggest fiscal consolidation could become “considerably more difficult” going forward, Keene said.
