Bogus presidential debates
After three debates, our opinion of the political and economic future of Ecuador depending on whom is elected has not changed. And we are sure that the confusion of many was not dissipated by the debates, either. We still consider Guillermo Lasso as the best option, and Andres Arauz as the worst.
The format of the so-called "debates" did not allow moderators to pursue answers, and the candidates’ responses were vague and clearly rehearsed. Yaku Perez and Andres Arauz did not attend the two first debates as they were not mandatory. In the last one, organized by the National Electoral Council, Perez’s delivery was better than expected, albeit within his own line and disconnected from the current economic reality of the country.
In our opinion, Guillermo Lasso from CREO, Xavier Hervas from Izquierda Democratica, and Pedro Jose Freile from Amigo all registered the more solid and consistent presentations, but as we mentioned, within a poor general context. An interesting edge was the joining up of all candidates against Arauz and Correa.
Recent polls from CEDATOS continue to place Guillermo Lasso as the leader of the political race with 23% of vote intention, followed by Arauz with 13% and Perez with 11%. On the other hand, polls from CELAG (openly socialist), put Arauz in first place with 36.5% and Yaku Perez third with 21.9%, followed by Lasso with 13.6%. It is difficult to take this pollster seriously as its poll included Alvaro Noboa, who was not a candidate at the time, and it put him in second place with 22.9%.
Recently released data from the Central Bank shows the economy recovered in Q3, growing 4.5% q/q, although the annual downturn continued with a drop of 8.8%. The Central Bank estimates a y/y GDP fall of 9.6% by the end of 2020, and the IMF upgraded its initial estimate of -11% to -9.5% y/y.
As we expected, the overall balance of the General Budget, at $6.9b, ended well below official estimates as of September of $8.2b, and even lower than the latest announcement of -$7.3b from Minister Pozo. This result also helps to estimate a lower deficit for the NFPS, which we expect to be around $5.7b.
In this context, the government was able to fulfill with ease the quantitative goals set under the IMF program for September, and will also be on the safe side for December. On the other hand, we are concerned about the outcome of the new Monetary and Financial Code that has the independence of the Central Bank at its core. Ecuador’s constitution declares the Central Bank as part of the Executive power, which poses a challenge when deciding how to introduce the new reform. Minister Pozo announced the bill will be submitted to the Assembly by the end of January, and legislators will have 30 days to vote.
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