An unexpected second runner-up
While the presidential outcome that placed Daniel Noboa in second place in the first-round presidential election came as a surprise to virtually every Ecuadorian, the results obtained in the Assembly and its distribution were in line with our expectations.
Four blocs will represent close to 85% of the legislators in the 2023-2025 period. Revolucion Ciudadana (RC) captured 37% of the legislators with 51 votes, followed by Construye, the movement that supported the deceased Fernando Villavicencio, with 31 votes and 23% of the total. Noboa´s party, Accion Democrática Nacional (AND), reached 13 votes–similar to Lasso´s CREO in 2021 (9%), and the Social Christian party placed 14 legislators (four less than at the beginning of 2021), securing 10% of representatives.
Political groups need at least 14 legislators to form a bloc with the right to propose candidates for president, vice president, and other legislative leadership positions, among other rights. Most bills and proposals need 71 votes to be approved, and if constitutional matters are involved, at least 92 votes are needed. In 2021 the RC, in coalition with Social Christians, a group from Izquierda Democratica and a group from Pachakutik, rapidly comprised the majority, but it will not be so easy this time. The elections proved favorable for the moderate right so that, if adequately approached by Noboa, that group could reach more than 72 votes when joining forces with Construye, Actuemos, Sociedad Patriotica, Amigo, and the Social Christians, who publicly stated they will not join the Correistas this time.
Winning the second round, however, could prove to be a double-edged sword as people’s expectations on topics such as security and overcoming violence, as well as improving the poor labor situation–the two main concerns of Ecuadorians according to the polls –are dangerously close to wishful thinking. Therefore, the interim president could face rapid frustration, which might kill his or her opportunity to be re-elected in 2025.
The new government will find dry fiscal accounts and few financial resources given the absence of sufficient multilateral disbursements and the improbability of issuing private debt. Country risk fell nearly 300 bp between August 8, when Fernando Villavicencio was assassinated, and August 24, although it is still extremely high at 1756 bp.
The public referendum on whether or not to continue with the exploitation of the ITT crude oil camps and large mining projects received 60% of votes favoring the environmental cause, except, ironically, in Orellana–the province where most ITT camps are located. Estimates of revenue lost to the budget lie between $700million and $1.5b per year depending on oil prices, plus another $100m in lost revenue for the adjacent communities.
Daniel Noboa has shown little concern about this loss as, according to his estimates, the cost to exploit the ITT exceeds potential revenues. However, we do not concur with his estimate. Luisa Gonzalez has not expressed her view on this issue so far.
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