Ecuador’s Rating Cut by Fitch
Ecuador has been hit with a credit rating cut by Fitch Ratings, a global credit rating agency, as the country prepares for a key election. The rating cut comes after the killing of a prominent indigenous leader, which has sparked protests and unrest in the country.
Background of the Rating Cut
The rating cut was announced on August 16th, 2023, and it downgraded Ecuador’s long-term foreign currency issuer default rating from B+ to B. The rating cut was attributed to the country’s “weakening political environment” and “heightened social tensions” in the wake of the killing of indigenous leader José Isidro Tendetza Antún.
Tendetza Antún was a leader of the Shuar indigenous people and a prominent environmental activist. He was killed on July 28th, 2023, in the Amazon region of Ecuador. His death sparked protests and unrest in the country, with many accusing the government of being complicit in his killing.
Political Environment in Ecuador
The political environment in Ecuador has been tense in recent months, with the country preparing for a key election in October 2023. The election is seen as a referendum on the government of President Lenin Moreno, who has been in power since 2017.
Moreno has been criticized for his handling of the economy and for his decision to cut fuel subsidies, which has led to a sharp increase in the cost of living. He has also been accused of eroding civil liberties and of being too close to the United States.
Fitch’s Assessment of Ecuador
In its assessment of Ecuador, Fitch noted that the country’s economic growth has been weak in recent years, with the economy contracting by 1.7% in 2023. The agency also noted that the government’s fiscal deficit has widened, and that the country’s debt burden has increased.
Fitch also highlighted the country’s political instability, noting that the upcoming election could lead to further unrest and uncertainty. The agency warned that the country’s economic and political situation could worsen if the election results in a “divisive outcome”.
Impact of the Rating Cut
The rating cut by Fitch is likely to have a negative impact on Ecuador’s economy. The country’s borrowing costs are likely to increase, making it more expensive for the government to borrow money. This could lead to further economic hardship for the country.
The rating cut could also have a negative impact on investor confidence in the country. Investors may be less likely to invest in Ecuador if they perceive the country to be politically unstable and economically weak.
Conclusion
Ecuador has been hit with a credit rating cut by Fitch Ratings as the country prepares for a key election. The rating cut was attributed to the country’s “weakening political environment” and “heightened social tensions” in the wake of the killing of indigenous leader José Isidro Tendetza Antún. The rating cut is likely to have a negative impact on Ecuador’s economy, with the country’s borrowing costs likely to increase and investor confidence likely to decrease.