On April 18, Ecuador’s National Electoral Council confirmed that businessman, Guillermo Lasso, had won the country’s second round of presidential elections on April 11, with 52.36% of the vote. The declaration was largely a formality as Mr Lasso’s leftwing rival, Andrés Arauz, had already conceded a week earlier, with the results of the election becoming clear just a few hours after the polls had closed, enabling Mr Lasso to declare himself president elect.
Mr Lasso’s election was a somewhat unexpected result, with polls beforehand widely suggesting that Mr Arauz (who led the first round) would be the victor. The result also marks a rejection of the leftist movement initiated by former president Rafael Correa more than 10 years ago.
Mr Lasso, a former banker, had campaigned on a ticket centred on restoring economic stability to the country, with an ambitious commitment to balance the budget within four years. He also pledged to attract greater foreign investment, create two million new jobs and proposed tax cuts for small businesses and a new fund to stimulate entrepreneurship.
He has also said he will mostly stick to the $6.5bn International Monetary Fund lending programme that Ecuador signed up to last year, although he is expected to seek minor changes.
Markets reacted positively to the result, with Ecuadorian government bonds surging in the wake of the poll. In the days after the election its recently restructured bond due to mature in 2035 rose 13 cents to 62 cents on the dollar, and its 2030 bond rose by a similar level to 75 cents on the dollar.
However, there is no hiding from the fact that Mr Lasso has a tough task on his hands. Ecuador’s economy shrank 7.8% in 2020 and its central bank has forecast growth of just 3.1% in 2021. In particular, Covid-19 could continue to weigh heavily on its economy. According to analysis from the Financial Times, the country has suffered the world’s second worst rate of excess deaths since the outbreak began and the country has struggled to respond effectively. It has had five different health ministers in the last year and only a small fraction of the population has so far been vaccinated. Although Mr Lasso has set the ambitious target of inoculating more than half the population during the first 100 days of his presidency.
Ecuador’s banks will be hoping for a strong recovery, as their profitability fell dramatically in 2020. Financiero Pichincha for instance, Ecuador’s largest bank by capital and assets, saw its pre-tax profits slump from $207.34m in 2019 to just $61.52m in 2020. It was a similar story at Banco del Pacifico and Banco Guayaquil, second and third largest banks, whose return on equity ratios (a key measure of profitability) fell from a respectable 13.07% and 15.03% in 2019 to 3.78% and 6.22%, respectively.
According to the Association of Private Banks of Ecuador, the slump was felt across the country’s banking sector due to the economic shock the country experienced during 2020. It said that small entities had a revenue reduction of -125%, followed by large banks with -64.1% and medium-sized banks with -56.7%.
