2024-08-07 08:26:41
Ernesto Revilla, chief economist of Citi Research For Latin America, he said the road will not be easy, but it seems feasible. From the perspective of international investors, the biggest concern now is political rather than economic.
There are concerns about the upcoming elections, the possibility of Noboa’s re-election and the dispute with the vice president.
Ernesto Revilla, Citi’s chief economist for Latin America He explained that international investors are cautiously optimistic about the financing agreement in between Ecuador and the International Monetary Fund (IMF).
«I am in New York and we talked to many external investors “And it seems to me that, in general, the market’s attitude is cautiously optimistic regarding the agreement with the IMF,” he said during a conversation with journalists from several Latin American countries.
According to Revilla, the agreement with the IMF, receiving the first disbursement of $1,000 million, in addition to the commitment of the Government of Daniel Noboa to carry out a tax reform to replace temporary income with permanent ones, was taken internationally as positive news; but after the initial surprise, attention is now focused on how the agreement will be implemented.
“It won’t necessarily be an easy path, but it is feasible,” Revilla said.
International investors are awaiting details of the next steps in the implementation of the agreement with the IMF. It is still unclear how the agreement will work. targeting of fuel subsidiesafter the first measures and announcements.
“We are in a moment that I would call a moment of a little more caution as we await the details of how things are going to be implemented, but in general it seems to me that if I had to define the sentiment, it is still cautiously optimistic,” reaffirmed the chief economist of Citi Research for Latin America.
Thats why he risk country remains high at 1,335 points and the price of Ecuadorian bonds has risen.
Whether Noboa is re-elected or not is one of the main concerns of international investors
Revilla stressed that currently much of the attention of international investors is focused on the upcoming presidential elections and in President Noboa’s chances of being re-elected.
“Now it is precisely the political variable that must be added to give stability and continuity to the reforms that Ecuador has undertaken to stabilize the economy. Of course, there are also challenges in terms of security,” he said.
Citi’s chief economist for Latin America is convinced that investors are cautiously optimistic about Ecuador’s fiscal consolidation trajectory, which is why they are “paying attention to the electoral process and the problems between the president and the vice president.”
In other words, the biggest concerns for the moment are on the political side, rather than the economic one.
Will Ecuador be able to issue bonds on international markets again?
Revilla said that the base scenario, if Ecuador continues on the path of fulfilling the agreements with the IMF and implementing them correctly, is that the country will be able to issue debt bonds again in international markets in 2025.
There are external factors that could help achieve this goal. On the one hand, Citi projects a soft landing (less growth, but not recession) in USA. In addition, it is believed that the Federal Reserve They can make three interest rate cuts by the end of 2024.
Con interest rates lower, the chances of countries like Ecuador being able to obtain financing in international markets increase.
At the moment, Citi Research does not have an economist for Ecuador, so it did not present projections for economic growth, inflation and other indicators for the country. It is expected that projections for the Ecuadorian economy will be presented in the next quarterly report.
Why are international investors more optimistic about the economy than Ecuadorians?
The cautious optimism of international investors contrasts with the growing concerns of Ecuadorians about the direction of the national economy.
When asked why this happens, Revilla explained that, on the one hand, Ecuadorians (like citizens of any other country, have to deal with the daily news, daily difficulties and we live all day with government administrationwith the traffic, with the unsafetywith the corruption.
“Those who live in a country have to see every detail of politics, listen to it every day and face the quality, which can vary greatly, of public services,” he said.
On the other hand, Revilla stressed that those outside (international investors) compare countries in a more distant way, “they are basically numbers that can be followed in a spreadsheet.”
»They become much less pessimistic because they compare many countries in relative terms, and they realize that of course these are not ideal conditions, there are many problems to be solved, but the macroeconomic fundamentals are better than what locals sometimes assess,» concluded the chief economist of Citi Research for Latin America. (JS)
By: LA HORA Newspaper