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LATIN AMERICA ADVISOR

LATIN AMERICA ADVISOR

A daily publication Of the dialogue

September 5, 2023

What Will Result From Ecuador’s Ratings Downgrade?

Fitch Ratings last month downgraded its ratings for Ecuador. Guayaquil is pictured. // File Photo: Sageo Padaguan via Creative Commons.

Q

A

Diego Andrés Almeida, managing partner at Almeida Guzmán & Asociados in Quito: “The downgrade is the result of different factors. Among the most important are the effects that El Niño might have on the Ecuadorean economy. It is estimated that the phenomenon could generate a reduction of between 1-5 percent of GDP, depending on its strength. It is also estimated that the result of closing the oil fields within the Yasuní National Park will affect projected oil production. Finally, the last tax reform that President Lasso enacted will cause a reduction in collection. The Fitch rating is in line with the country’s risk, which had also seen a significant increase prior to the election. The new rating is already affecting the local economy. Paying higher interest on loans reduces the competitiveness of Ecuadorean exports. It is expected that Ecuador will have to issue new debt to cope with the effects of El Niño. Currently, Ecuador is…”

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