Ecuador & Argentina: political resets and bond opportunities

Ecuador: political reset and robust funding pipeline

Ecuador’s recent referendum saw voters reject all four proposals put forward by President Noboa, ranging from allowing foreign military bases on Ecuadorian soil to changes in political party funding. While this is a setback for his administration, it reduces political volatility until the next local and presidential elections in 2027 and 2029. For investors, the outcome is seen as positive: it removes the risk of constitutional upheaval and keeps the focus on economic and security reforms.

Political landscape: young at heart, old challenges

Noboa’s government is young and insular, with ministers stretched across multiple portfolios and a cabinet drawn largely from his inner circle. While his popularity remains high, critics point to a lack of clear long-term ideology. The business community, especially in mining, is frustrated by inconsistent policies and limited access to decision-makers. Still, most observers expect Noboa to finish his term, with hopes that he will broaden his cabinet and engage more constructively with business over time.

External financing and fiscal discipline: strong pipeline

Ecuador’s Ministry of Finance has a robust pipeline of external funding, including guarantees backed by the Inter-American Development Bank and the World Bank, and plans for Eurobond issuance in 2026. The country is also planning to expand its environmental, social and governance credentials, with future borrowing linked to social projects.

The authorities are committed to the International Monetary Fund's (IMF) programme targets, with recent fiscal adjustments – such as increasing value-added tax and removing diesel subsidies – expected to deliver permanent savings. While there are some creative accounting measures to meet constitutional requirements, both the government and the IMF remain confident the country can hit its fiscal targets.

Investor takeaway: opportunity knocks, but tread carefully

Ecuador’s defeat of the referendum reduces near-term political risk and supports a more stable policy environment. With strong external funding and fiscal reforms in place, we see scope for spread tightening in 2025. However, ongoing execution and governance risks mean selectivity remains key.

Argentina: reform momentum, but policy risks remain

President Milei’s decisive midterm victory has cleared the way for budget, tax, and labour reforms in 2026. With a divided opposition, the political climate should be quieter in the near term, which supports reform momentum.

Market and policy outlook: reading the runes in Buenos Aires

In the short term, the outlook is positive. The government is committed to a zero overall budget balance, and engagement with the IMF remains strong. Debt management is focused on rolling over 2029 and 2030 bonds, with potential for new, possibly guaranteed, bonds to attract demand. However, the details of upcoming Eurobond payments and market access strategies remain a closely held secret.

Risks and challenges: old habits, new hurdles

Longer term, caution is warranted. The central bank (BCRA) is seen as a potential source of policy missteps, particularly around foreign-exchange management and reserve accumulation. Dollarisation remains a persistent challenge, with $250 billion in cash held outside the banking system and little sign of a shift in local habits. Foreign direct investment (FDI) is hampered by a history of broken contracts, shifting tax regimes, capital controls, and inadequate infrastructure, especially in mining. Geopolitically, China’s influence is growing, while the US lags despite its recent bailout.

Investor takeaway: reform rally or déjà vu?

Milei’s win paves the way for reforms and potential market access, but policy execution, dollarisation, and FDI challenges mean selectivity and caution are essential. Short-term opportunities may arise, but structural risks remain ever-present.

Final thoughts…

Visiting countries provides insights you can’t get from third-party reports. Both Ecuador and Argentina face political and economic challenges, but each is at a different stage in its reform journey. For investors, the key is to look beyond the headlines – understanding local dynamics, policy execution, and external funding pipelines is essential for navigating these complex markets. Discernment and on-the-ground perspective remain critical as the outlook evolves.

We’ll continue to monitor developments closely and adjust our positioning as new opportunities – and risks – emerge.