International markets give the Government a vote of confidence in its first 100 days, but are waiting expectantly for the agreement with the IMF and reforms

The relationship of powers between the Executive and the Legislative is the greatest uncertainty for the markets, since the regime has no majority in the assembly.

TheFirst hundred days of the government of Guillermo Lasso aroused a kind of enthusiasm in international markets,This was translated into the improvement of the price of debt bonds and the decline in yields. This last factor is inversely proportional to market confidence, at lower performance, greater confidence. According to Bloomberg's records,Bonds 2030 to 9 de Aprilpresented a performance of13,4 %,while forMay 26They went downa 7,9 %.

Likewise, it was barely known that Lasso won the second round elections,The country risk(which measures the confidence of the markets in the fulfillment of obligations of the country, as well as determines the price of financing in the markets)He lowered 333 points(It went from 1,168 points on April 8 to 835 on April 12). For this August 26, the risk of Ecuador was at 775 points.

However, the good omen, who generated the victory of a president and pro -investment president and subsequently the good results of vaccination, do not yet yield more concrete results. Several analysts agree thatThe image of Ecuador has improved; But there are still certain fire tests that you must face.Only then could a more important decline be expected in the country risk, which allows Ecuador an index of greater confidence.

Alejandro Areaza, responsible for the macroeconomic coverage of Barclays in the Andean and Caribbean economies,considers that in the first 100 days of the government aWill to continue with the reform agenda that the country needs, maintain the agreement with the International Monetary Fund (IMF) and create a more attractive climate for investment.The government currently has the support of citizenship, which suggests that there is still a period of "honeymoon," he says. However, from now on there will be at leastTwo critical evidencethat the government must face: theconcretion of the agreement with the IMFAnd a possible first step that would be aTax Reformand that must go through the assembly.

About the topic, The Minister of Economy, Simón Cueva, said this week that in September the key points on the Tax reform that would go to the increase in taxes for those who earn the most and the elimination of certain exemptions. A VAT increase is not planned. The government has also been working on its labor reform: Opportunities Law, aimed at improving employability for those who have no job. From the oil area, the government also has a reform to the Hydrocarbons Law to allow the change of contracts and the delegation of fields of the state oil company to private hands.

Therefore, for Areaza, theRelationship of powers between the Executive and the Legislative is the greatest uncertainty for the markets, since the government has no majority in the Assembly. The agreement reached for the election of authorities is fragile and the treatment of reforms will be the thermometer of how said coalition is operating.

In these 100 days, theImage of EcuadorIt has gone from being of the worst countries in the management of COVID and vaccination, to oneefficient and organized in this task. Having maintained the decree ofFuel Price Bands, which has significantly reduced gasoline subsidies, as well as the returnto the agreement on arrangement of differences related to investments between states and nationals of other states (Ciadi),that generates confidence to investors, are the most important points in this first period of the government,Ramiro Crespo, President of Analytica Securities, says.

However, issues such as the position ofLeonidas IZA, main of the Confederation of Indigenous Nationalities of Ecuador (CONAIE) against fuels and fragmentation in the assembly, generate concern in the markets,Explain. He also points out that pending tasks for the country can be to reduce the size of the State and the attraction of investments effectively.

In any case, for Crespo it must be taken into account that 100 days of government have elapsed and that citizens must rule out that there are magical solutions or a miraculous leader who can solve the problems."You cannot demand what several governments have not done in decades," he said.

In accordance withSantiago Mosquera, Dean of the UDLA Business School, international markets are wearing the new administration of President Guillermo Lasso.Of course, the marketsgive a discounted that we are going to have the agreement with the IMF,which would generate greater confidence. For Mosquera, markets in general see Ecuador as a more attractive destination for foreign investment, after the problems that have been generated in neighboring countries.

As soon asTo the country risk, Mosquera considers that there is still a space for its improvement.But this would be generated if there were at least three important issues.A tax reform approved by the Assembly: if the agreement with the IMF that represents an important change in terms of financing amounts and the extension of the deadlines is achieved.Finally, if after the vaccination programThere is economic reactivation and it begins to flow to foreign direct investment.

About the topic,Jaime Carrera of the Fiscal Policy Observatory (OPF),He recalled that our neighbors:Colombia (277 points) and Peru (146 points)They maintain a low country risk and stable macroeconomic indicators, despite even the problems generated a few months ago when there were a series of social protests and after the assumption of command by Pedro Castillo. He explained that to achieve a BBB investment grade, large reforms and solid economies are required in many years. Currently, the rating agencies maintain a low rating for the country, he explained.