Index trend
Previous Quarterly Editions
Expropriation risk: 66 66 66 66 ► Political violence risk:50 50 57 57 ►Terrorism risk:67 65 50 60 ▲Exchange transfer and trade sanction risk: 54 54 54 55 ►Sovereign default risk:65 65 57 56 ►
Overall Risk Temperature: 60 (Significant 1) TREND ▲
Special topic: Political polarization
Ecuador has become increasingly politically polarized since the former President Rafael Correa (2007–2017) left office. His predecessor, Lenin Moreno (2017–2021), was voted into office with a mandate to continue the leftist political project of Correa — the ‘Citizen’s Revolution’ — but he opted to dismantle it instead and implement policies based on economic liberalism and fiscal austerity under the guidance of the International Monetary Fund (IMF). During Moreno’s presidency, several prominent leaders of the Correa government were charged with corruption, including the former vice president, Jorge Glas, who was imprisoned, and Correa, who has escaped prison because he lives in exile in Belgium.
This sharpened the pro/anti Correa divide that emerged during his decade-long presidency, partly because of his populist political strategies, which helped create strong, emotionally charged opposition to his political project. However, Correa also cultivated a powerful affective bond with a large constituency of voters who benefited from the improvements his governments made during his decade in office. The pro/anti Correa divide has been reflected in narrow defeats for Correa candidates at the 2021 and 2023 presidential elections and persistent clashes between the executive and legislature, where Correa followers have retained considerable influence.
Daniel Noboa, the current president, took office in late 2023 to complete the four-year term that Guillermo Lasso (2021–2023) was elected to serve but ended early to escape impeachment. Noboa was reelected on April 13, beating the Correa candidate, Luisa Gonzalez, in a run-off with 56% of the vote against Gonzalez’s 44%.
The run-off between Noboa and Gonzalez was an ideological clash between right and left and a competition between two variants of populism: the former around Noboa, who has aligned closely with U.S. President Donald Trump, and the latter around Correa, who is associated with the Latin American left.
The legislative elections that took place at the same time as the first round of the presidential elections were also highly polarized, with the chamber virtually split between supporters of Noboa and Correa. Hence, executive-legislative tensions are likely to continue during Noboa’s new term.
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Short-term expropriation risks to foreign investors are relatively low. President Noboa has followed and extended the liberal economic policies of the Lasso government. His government has worked hard to attract international investment, including introducing tax breaks and encouraging international investment in the energy and mining sectors. Last May, Noboa also signed a new $4 billion loan agreement with the IMF. The greatest short-term risk of expropriation for international investors remains in the oil and mining sectors because of widespread social opposition to these industries.
Had the Correa candidate, Luisa Gonzalez, won the presidential elections, that would have been a break with economic liberalism and the introduction of state-centric economic policies. However, expropriation risk might also increase under Noboa, whose economic policies are less predictable.
Political violence has surged in Ecuador over the past five years, with political assassination, threats and attacks becoming common — including the assassination of presidential candidate Fernando Villavicencio in August 2023 and the murder of several local politicians in the coastal region in 2024 and early 2025.
In response to a surge in crime and violence, Noboa declared the existence of an armed internal conflict in January 2024 and increased the role of the military in maintaining order, including in prisons. Violent deaths declined immediately after the introduction of these measures but have steadily increased since then, reaching record levels in January 2025. Noboa’s security policies appear to have splintered drug gangs and cartels, which has led to more violence as rival groups have vied for territorial control of lucrative drug trafficking routes and local politics. The security situation remains highly precarious, and the risk of political violence is extremely high.
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As part of its clampdown on crime and violence, the Noboa government has classified 22 criminal groups terrorist organizations, all of which have links with international drug cartels, especially from Mexico, Colombia and Albania.
The Noboa government has increased military and intelligence ties with the U.S. to attempt to combat this threat. In September, Noboa announced his plans to modify the constitution to allow foreign military bases in Ecuador, 15 years after the U.S. military base in Manta was closed. However, it will be difficult to secure sufficient support for this proposal.
The government has increased military and defense spending this year. However, austerity policies and weak economic growth have limited investment in security. Criminal groups linked to drug trafficking continue to present a significant risk to internal security.
The Noboa government is firmly committed to dollarization, which was introduced in 2000, and has also supported free trade and economic liberalism.
However, Noboa introduced tariffs on Mexican imports in February, seemingly in an effort to win approval from the Trump administration, and might introduce more protectionist policies.
The Ecuador-China trade agreement has come into effect, as has a trade agreement between Ecuador and Costa Rica. The Noboa government has also held preliminary talks with the Canadian government about a free trade agreement. However, tensions between the U.S. and Canada might prevent this from advancing.
The Noboa government agreed on a 48-month $4 billion loan with the IMF in May 2024 and has used some of these funds to service public debt, including with the IMF. The Noboa government increased VAT from 12% to 15% and introduced a tax amnesty, which increased government revenues.
However, the tax hike has contributed to the continuation of the weak economic growth that Ecuador has experienced for several years, and the economy is believed to have contracted in 2024.
The country has experienced electricity rationing since late 2023 due to a prolonged drought and lack of investment. This has had a significant impact on economic activity and government revenues.
Following a referendum in August 2023 that mandated that oil operations in and around the Yasuni National Park should cease, the Noboa government announced the gradual closure of the oil fields in August. This will reduce government revenues from the oil sector, although the government hopes to increase oil production elsewhere in the Amazon.
The Noboa government will prioritize debt servicing, and a new IMF agreement will give international investors greater assurances over the possibility of sovereign debt default.