Categories: Markets

Ecuador’s Lasso Seeks to Reform Capital Markets Before Leaving Office

(Bloomberg) — Ecuador’s President Guillermo Lasso plans to issue at least six new legal orders and demand major changes to the country’s capital market before he leaves office in early December, he said Thursday.

Lasso ruled by decree before the August 20 snap election triggered by his legal dissolution of congress in May. He must submit the measures to Ecuador’s Constitutional Court, which reviews bills in the absence of lawmakers.

Capital market reform is “a major project we are working on,” Lasso said in an interview with Bloomberg TV’s Shery Ahn in New York, adding that the goal is to modernize the system and make it more attractive to foreign investors.

He said he also plans to issue a decree allowing the government to sell land to shrimp farms to raise revenue.

The constitutional court has so far only allowed a decree changing tax deductions to take effect. It rejects the other about duty-free zones because it is not urgent.

Lasso is in New York to discuss free access to US markets for Ecuadorian exports, and to seek emergency funds to deal with the upcoming El Niño climate event. Major El Niño systems in the 1980s and 1990s caused severe economic damage after heavy rains destroyed highways.

Read More: El Niño Comes With Promise of Global Weather Chaos

Ecuador is better prepared than in previous decades to face the event and does not seek loans from the bond market or China for emergency funding, relying instead on lenders such as the World Bank, said Lasso.

During his trip, he will meet with US lawmakers as Ecuador looks to join Caribbean countries in getting free access to the US market for more than 90% of its goods. “Regarding relations with China and the US, we are an example of pragmatism,” said Lasso, whose government signed a free trade agreement with China earlier this year.

Upcoming Elections

The Andean country will elect a president and congress on August 20 after Lasso made a historic decision to dissolve congress. The new officers will serve until mid-2025, when Lasso’s term ends.

Lasso will not seek the presidency in a snap election and his party will not participate either.

Left-wing candidate Luisa Gonzalez, one of the lawmakers ousted by Lasso, leads the polls, followed by centrist former Vice President Otto Sonnenholzner in a field of eight.

Read More: Socialist Frontrunner Faces Former Sniper in Ecuador Elections

Polls show he did not get enough support to win the first round, meaning there will be a second vote in October. Gonzalez is close to socialist former President Rafael Correa, who has remained influential in Ecuador’s politics since leaving office even though he was found guilty of corruption by the left.

Correa faces arrest if he returns to Ecuador from his current home in Belgium, his wife’s homeland.

“Ecuador’s stability is at stake in the next election,” Lasso said. “What I hope will happen is that the reform processes will continue that allow the economy to strengthen, and above all to move away the specter of a default that would harm the country.”

Amid Lasso’s declining political fortunes, Ecuador’s bonds have underperformed and are now trading at deep distress levels. Investors worry that the next administration may not pursue market-friendly reforms that they believe will allow the economy to grow enough for the serial-defaulter to manage a bond payment schedule that will become more onerous by 2026.

Read More: Why Ecuador’s Leader’s Fall Has Investors Nervous: QuickTake

Correa refused to repay the bonds in 2008, even though Ecuador had the means to repay its debt at the time.

Ecuador in May completed a special debt transaction led by Credit Suisse Group AG in which it issued “blue bonds” for efforts to protect the Galapagos Islands and its surrounding waters. Ecuador exchanged $1.6 billion in nominal value denominated bonds for a new $656 million in debt. As a result, the country slashed more than $1.13 billion from its total debt.

The administration is working on more debt-for-nature deals, but it has little time to complete any of these complex transactions before the end of Lasso’s abbreviated presidency. The government does not expect to issue more deals before Lasso leaves office, but it is working on a manual to shorten the timeline from the two years it took for the Galapagos to six months, he said.