Ecuador Bi-Weekly Report

Assessing the First Contraction in a Decade

May 8, 2017BancTrust & Co. Research Team
  • The Central Bank reported a GDP contraction of 1.5% in 2016, but the 4Q16 saw increases of 1.7% q-o-q and 1.5% y-o-y. For 2017, the government expects a GDP growth of 1.42%
  • Finance Minister Patricio Rivera headed a mission of the economic cabinet meeting with investors in the US and London
  • Exports in the first two months of 2017 increased 34.1% y-o-y, with the oil-related exports more than doubling 2016’s total

The Central Bank of Ecuador (BCE in Spanish) confirmed recently that the country suffered in 2016 its first GDP shrinkage in 10 years, after a -1.5% result provoked by – according to the BCE – the low oil prices, the USD appreciation, the April earthquake and the payments to Chevron and Oxy. The government expects a change in the trend in 2017 in order to grow 1.42%, but we continue to believe that the difficult macroeconomic conditions – with a still insufficient fiscal income, weak oil prices and increasing public indebtedness – will not change substantially and, therefore, we maintain our estimation of a -1% GDP contraction by year-end.

Ecuador Bi-Weekly Report

An Electoral Conundrum

April 28, 2017BancTrust & Co. Research Team

• The official vote recount ratified the results proclaimed by the National Electoral Council and reaffirmed Lenin Moreno as the winner of the presidential election
• A year after the earthquake, the Ecuadorian government surpassed its tax collection target via the Solidarity Act and executed the totality of its budget for reconstructions efforts
• Unemployment fell in March on account of the reactivation of some sectors of the economy and higher public spending propped up by the electoral timetable

A year after a 7.8-magnitude earthquake hit Ecuador’s coast and brought up damages for up to USD3.35bn, the country is now undergoing a new phenomenon – this time, political. The economic recession and the highly polarized scenario served the stage for presidential elections which ended in direct confrontation and accusations between the two sides.

Ecuador Bi-Weekly Report

Continuity Seems to Rule

April 7, 2017BancTrust & Co. Research & Strategy Team
  • This Sunday 2 April, will be carried out the runoff presidential elections
  • According to the latest polls, Lenin Moreno –Correa’s candidate – is the leading candidate as some financial scandals around opposition candidate, Guillermo Lasso, harmed his campaign against continuity
  • The Minister for Foreign Trade, Juan Carlos Cassinelli, reported advances on the multiparty trade agreement and in the lifting of the “Salvaguardias”

Finally, this Sunday 02 April Ecuadorians will decide who is going to be their president for the next four years and the race for the runoff election has set up a complicated scenario, which we hope to clarify in favor of understanding.

Ecuador Bi-Weekly Report

Consolidated Debt Discrepancies

March 24, 2017BancTrust & Co. Research & Strategy Team
  • The external indebtedness plan for 2017 contemplates USD7.7bn from which USD2.5 has already been taken. We don’t expect further issuances at least until late May
  • Even when recent polls give significant advantages to Lenin Moreno in the runoff election, we think it is too early to determine a clear trend
  • Tax collection in January increased 12% y-o-y, translating into consecutive y-o-y increases of over USD100mn

This week we reported through our daily comments that the Finance Ministry of Ecuador published the figures for internal public debt for February and the first days of March, which showed an USD1.8bn growth, making the total debt to stand at USD4.3bn. Within the reasons behind this 75% increase in one month was an apparent hike coming from domestic bonds’ debt, which alone registered an increase from USD1.2bn in February to USD2bn for this month. Nonetheless, in the middle of the week the Economy Minister, Diego Martinez, informed that they have noted some discrepancies in data coming from the Finance Ministry and that the USD1.8bn increase did not exist, reason why they will thoroughly revise the information for the next 10 days.

Ecuador Bi-Weekly Report

A nail-biting Runoff Election

March 10, 2017BancTrust & Co. Research Team
  • We expect the runoff election to be highly polarizing and marked by a greater intervention of President Rafael Correa
  • The opposition candidate Guillermo Lasso leads the latest poll by Cedatos, 52.1% v 47.9% of the Alianza País (AP) candidate Lenin Moreno
  • The upcoming announcement of endorsement by ANC –fourth in the first-round vote- could either enhance or harm Guillermo Lasso’s chances to overthrow the 10-year governance of Alianza País

Ecuador’s political scenario continues to heat up as all eyes are set on the 2 April runoff vote, in which the ruling party candidate Lenin Moreno will face Guillermo Lasso after the former failed to garner 40% of the votes and win the Presidency in first-round election. Teh new campaign will run until 30 March, in a presidential race we consider will be determined by the alliances they accomplish. According to a local pollster, Guillermo Lasso holds 52.1% of the intention vote while Lenin Moreno counts for 47.9%. The survey, conducted between 23 and 24 February, reveals that the percentage of undecided voters remains high despite a significant drop when compared to the first-round election (19% v 40%).

  • Thursday, May 25 2017

    - During a televised press conference, the top Public Prosecutor Luisa Ortega Diaz addressed several events regarding the wave of protests in Venezuela. In detail, the prosecutor denounced the possession of arms by the population despite the current ban by the Ministry of Interior, the performance of state security forces and military trials of civilians. One of the statements with greatest impact referred to the cause of death of a young opposition demonstrator product of a metal projectile fired by an official of the Bolivarian

  • Wednesday, May 24 2017

    - Finance Minister Ramon Lobo and the Executive Board of the Central Bank of Venezuela (BCV in Spanish) announced the start of operations of the new FX system DICOM. The system will work through two weekly auctions (the first one will take place tomorrow) and a bands’ system where the FX rate will fluctuate – the starting rate has not been announced yet. The official rate will be the lowest offered by those who are adjudicated, but a “contingent” auction will take place in case that such rate exceeds the upper band establis

  • Tuesday, May 23 2017

    - For today, the new FX scheme, DICOM, is set to begin operations, and yesterday the Minister of Foreign Trade and International Investment, Jesus Faria, assured that the main goal is to reduce the impact of the parallel dollar and to increase the assignment of currency for business. It is expected that today further details of the mechanism will be disclosed from the facilities of the Central Bank of Venezuela (BCV for its words in Spanish), so stay tuned for more.


    - The US Treasury Secretary, Steven Mnuchin, told the Senate yesterday that regulators would review Rosneft’s stake of Citgo Petroleum Corp., this as concerns have emerged over possible control from the Russian company in case that PDVSA fails to make payments on the bonds guaranteed by Citgo’s collateral. Senators raised their concerns – regarding Rosneft’s “control of a major US energy supplier” – on what they consider a national security matter to Mnuchin, who heads the Committee on Foreign Investment in the Unite


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