The economic problems Ecuador's next president must address

The winner of Ecuador's presidential runoff on April 13 will have to confront economic problems, including energy issues, immediately after taking office.

But neither President Daniel Noboa nor opposition candidate Luisa González have provided details on economic policy, which is increasing uncertainty.

So far, both are neck-and-neck in the polls.

BNamericas talks with former finance minister Fausto Ortiz about the economic issues awaiting the next administration, and why passing controversial laws won't be so easy during the next presidential term.

BNamericas: What's the current economic situation, and how might it change after the election?

Ortiz: The problems… are the same for both González and Noboa. The fiscal situation is delicate, with a deficit of 3-4% of GDP and financing needs of around US$12bn.

The issue is how they will address the problems, such as the relationship with the International Monetary Fund, the bond markets, financing from friendly countries, in one case with the US [Noboa] and in the other with China [González]. What will they do with the monetary reserves?

These are the topics that will differ between a Noboa administration and a González administration.

BNamericas: Neither of the candidates has published economic policy details. What do you think they have in store?

Ortiz: The differences between one and the other will lie precisely in the details.

If Noboa wins, I don't think much will change from what he's done so far, beyond consolidation on the economic front, now much more solidified by experience.

Under González, the exports sector could be a winner, but banking will lose, as it will be subject to taxes, which is negative.

Addressing employment will be a priority, and both will therefore seek to prioritize the construction sector.

With González, there may be uncertainty about whether she will attempt to pass a law to use the reserves, but one advantage in this regard will be the makeup of the national assembly, in which Noboa and González will have virtually the same number of legislators.

This composition of the assembly, practically split in half, means they will not be able to pass laws as they please.

At the moment, I don't see much difference in economic management, but I do see a few more setbacks under González than under Noboa.

This uncertainty will continue until the start of the government, after which the path to be adopted will be defined.

BNamericas: Is this uncertainty related to González potentially bringing back the governing model of her ally, former president Rafael Correa?

Ortiz: Yes, but the difference will be that it will require passing laws, and that won't be so easy in the assembly. Making changes with an absolute majority in the legislature, as Correa once had, isn't the same as having the same number of legislators as the main opposition.

While not everything you want to do will require an absolute majority, passing laws with a simple majority will also require not only the entire governing legislative bloc but also convincing other legislators, and passing potentially controversial laws will not be easy.

Everything will depend on the type of law that is to be passed.

BNamericas: Would González seek rapprochement with China, like Correa did?

Ortiz: At least initially, González will try to ally herself more with China, but I wouldn't be surprised if she later also makes overtures to the US.

The situation is too complex to say I'm going to fight with everyone right from the start, so it will be important to see how the government gets started and how it progresses along the way.

BNamericas: What can strategic sectors such as mining, oil and electricity expect from the next administration?

Ortiz: There are fewer subsidies in the oil sector now, and they might even consider targeting diesel subsidies to increase the tax base.

On the practical side, Correa paved the way for extraction at block 43-ITT. He paved the way for the two large mines in the country [the Mirador copper mine and the Fruta del Norte gold mine].

So, in some cases, pragmatism trumps politics.

Either side will try to negotiate the mining issue appropriately. But we'll have to keep an eye on things as they progress in either case.

The electricity sector requires investment, and for that, it needs financing. That's why I think the political aspect could be subject to the economic aspect because resources are needed.

BNamericas: Could a González government trigger another foreign debt default?

Ortiz: The amounts payable from 2026 onwards for external debt bonds are relatively small, around US$600mn each year.

I don't think anyone would consider defaulting to avoid paying US$600mn when they need to raise US$12bn.