Millennial leader takes over broke crime ridden Ecuador Yahoo Finance

Millennial leader takes over broke, crime-ridden Ecuador – Yahoo Finance

(Bloomberg) — Bad debt, political assassinations, anti-mining unrest and rising crime: Ecuador’s problems would be daunting for a seasoned statesman. Instead, a 35-year-old president, Daniel Noboa, and one of the world’s youngest cabinets face the colossal task of saving a nation in danger of becoming a failed state.

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After being sworn in at 11 a.m. local time on Thursday, Noboa’s 26-year-old party leader in Congress, Valentina Centeno, will have to work with an unstable legislature that makes it difficult to pass laws or raise taxes. As the government tries to contain the budget deficit, it must tread carefully to avoid mass unrest that followed recent attempts to cut subsidies.

Noboa has promised to swear in the entire cabinet by Sunday.

The new government has just 17 months left until Noboa completes the term of outgoing leader Guillermo Lasso.

“This cabinet faces a very steep learning curve, which could become a problem with a transitional government that will last a year and a half and will have to adopt reforms on various fronts,” said Sebastian Hurtado, president of political risk consultancy Profitas in Quito.

Investors are skeptical about whether they will be able to stop the country’s downward spiral. Before the October election, many analysts predicted that a Noboa victory over his socialist rival would trigger a rally in bonds, but so far this has not materialized.

Read more: Bond markets offer little patience for Ecuador’s elected president

Latino voters yearning for change have recently elected leaders who are either very young or far outside the mainstream. Chilean leader Gabriel Boric, who took office last year at age 36, experienced a decline in popularity early in his term and had to appoint more experienced politicians to his cabinet to replace some of the student leaders who helped him take office.

The story goes on

Costa Rica and El Salvador have also elected presidents in their 30s in recent years, while Argentine voters this month backed 53-year-old libertarian economist Javier Milei, who has no experience holding executive office, with a promise to take over to abolish the country’s entire economic model.

Noboa’s most pressing task and the most important issue for voters is curbing the cocaine trafficking and extortion gangs that have overrun the country and led to a more than 300% increase in murders in the past five years. He said he would move the most dangerous offenders to barges in the Pacific Ocean and clamp down on the prison system after a series of riots and massacres.

“This is an area where the president needs to show results relatively quickly,” Hurtado said.

As of Wednesday evening, Noboa still had not named his top security officials, including the defense and interior ministers.

Centeno said Wednesday that Noboa would declare a state of emergency to allow the government to pass a tax law and an energy law and take swift action against crime.

In need of money

The government’s other urgent task is to stabilize the country’s deteriorating fiscal situation, Hurtado said.

Read more: Murder, cocaine and tears: Ecuador is facing a dangerous decline

U.S.-educated Noboa has said he wants to cut taxes to boost job creation and attract investment in energy and tourism. But he will take over a cash-strapped Treasury Department that is effectively cut off from global credit markets.

Noboa has asked a more experienced economist, Cornell University-educated Juan Carlos Vega, 51, to be his finance secretary, Vega told Bloomberg early Thursday in response to written questions. The president-elect had originally appointed 35-year-old economist Sariha Moya to the position and then moved her to the planning department the day before his inauguration.

The fiscal situation requires unpopular austerity measures that run counter to Noboa’s desire to be re-elected in 2025, said José Hidalgo, head of the Quito-based economic think tank CORDES.

Adding to the government’s financial difficulties, the government stands to lose some of its oil revenues after voters ordered the closure of one of state oil company Petroecuador’s main fields in a referendum.

“The new government faces a more difficult and complicated liquidity and financial situation than it realizes,” said Simon Cueva, finance minister in 2021 and 2022. “This implies measures that are unpopular in the short term but necessary for serious government are.” “

CORDES estimates the budget deficit at about 4% of gross domestic product this year, rising to 4.5% to 5% in 2024. The country’s dollar bonds due in 2035 are trading at 37 cents on the dollar, as investors bet the government will likely do will default as early as 2026 when large payments come due.

Noboa’s press office did not respond to calls or written requests for comment.

Green hydrogen

Andrea Arrobo, 33, an expert in green hydrogen, takes over the Ministry of Energy and Mines. It also faces a major challenge as oil and mining, the country’s largest and fourth-largest export industries, face hostility from indigenous and environmental interest groups, making the sector’s development fraught with political risks.

Sade Fritschi, 26, will become environment minister, a key role in a country where voters recently backed a referendum to restrict gold and copper mining. It must also protect its home Galapagos archipelago and its unique wildlife from a massive, mostly Chinese, fishing fleet that has been operating nearby in recent years.

Noboa’s chief of staff and the ministers of trade, public works and education are all in their 30s, while his health minister is 49 and his appointee as head of foreign relations, Gabriela Sommerfeld, is 52.

– With support from Maria Elena Vizcaino and Philip Sanders.

(Updates to include finance minister-designate)

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