Ecuador: New president will only govern for 1.5 years but is likely to continue business-friendly and orthodox policies

Event   

Daniel Noboa, a 35-year-old former businessman, won the second round of the presidential elections on 15 October. He won with a lead of more than four percentage points over his opponent Luisa González of the far-left party “Revolución Ciudadana” (RC), led by former president Rafael Correa (2007–2017). President-elect Noboa will take office end December but will hold the presidency only until May 2025, less than half of the full presidential term. He will complete the presidential term of Guillermo Lasso, who dissolved parliament in May 2023, triggering snap elections for the first time in Ecuador’s history. Noboa will be Ecuador’s youngest ever president.

Impact  

The election result means that Ecuador currently avoids a shift back to the state-led economic model as seen under President Correa. Indeed, policy continuity as seen during President Lasso’s term can be expected. Noboa is likely to maintain fiscal prudence, reinforce dollarisation, strengthen investor-friendly policies and possibly even enact a new IMF programme. Tackling rising insecurity will also be a key priority as criminality and gang activity has seriously increased in the past year, with criminal organisations battling to control drug routes. 

That being said, advancing his reform agenda will be difficult. In theory, Noboa should be able to avoid the gridlock Lasso experienced during his presidential term, as there are now more right and centre-right parties than under Lasso’s presidency. Nevertheless, the far-left party RC has the most seats in the legislature while Noboa’s party will only have about 10% of the seats. On top of that, Noboa is rather unexperienced and it remains to be seen how he will handle the policy-making process.

Another challenge is the short timeframe the president-elect has while his proposals will need time to unfold, making short-term results rather unlikely. Hence, disillusionment could set in quickly, increasing the risk of unrest, notably if insecurity spirals further out of control. Furthermore, the short presidential term also increases the risk of short-term and populist policies, especially as Noboa will likely seek re-election in 2025.

In the current context, the ST political and MLT political risk classifications remain unchanged for this fully dollarised economy. The business environment risk rating has a stable outlook amid robust, albeit low, real GDP growth (of 1.4% in 2023 and 1.8% in 2024), though potential severe unrest or violence and possible floods triggered by El Niño are a downside risk.

Analyst: Jolyn Debuysscher – J.Debuysscher@credendo.com