Ecuador had its credit score slashed Wednesday by Fitch Ratings, which cited heightened financing risks for the Latin American nation rocked last week by the assassination of a candidate in its presidential election.
The credit assessor lowered its rating by one step to CCC+, seven notches below investment grade.
Over the last five years, rival drug cartels have turned Ecuador from a relatively peaceful corner of South America into one of the most violent places in the world, with car bombs, contract killings and prison massacres. Last week’s assassination of presidential candidate Fernando Villavicencio at a rally last week “underscores the heightened political and security risks,” Fitch said in a statement.
“There has been an increase in political risk and governability challenges, and regardless of the outcome of upcoming general elections, Fitch does not anticipate significant reform progress to address Ecuador’s fiscal and financing challenges in the remaining 18-month presidential term,” the rating firm said. “This will continue to hinder the sovereign’s market access and ability to secure an IMF successor program.”
Fitch forecasts the deficit to rise to 3.4% by 2025 as revenues adjust to slower growth, lower oil revenues, and the impact of President Guillermo Lasso’s tax cuts, with expenses increasing on the back of rising interest on debt and social demands.
Fitch noted that the central government’s fiscal position “has started weakening after significant improvement since Ecuador entered into an Extended Fund Facility with the IMF in 2020.”
