(Bloomberg Opinion) – Ecuador’s bonds tumbled after the constitutional court ruled late Wednesday that it will grant the impeachment petition against President Guillermo Lasso.
By a vote of 6 to 3, the judges cleared the way for the National Assembly to try to oust one of Latin America’s few pro-market presidents if he serves less than half of his four-year term, the court said in a statement.
“Despite expert opinion that the charges fell short of legal and constitutional requirements, the court succumbed to pressure to make a political rather than a technical decision,” said Siobhan Morden, managing director of strategy, in an email from Fixed Income for Latin America Santander.
An opposition coalition of left-wing supporters of former President Rafael Correa, the conservative Social Christian Party and dissidents from centre-left parties have accused Lasso of negligently allowing corruption in public administration.
Lasso has called the allegations baseless and says they do not meet the legal requirements to charge him. In a statement, his government said it respected the court but did not agree with the verdict.
“This decision in no way confirms the lawmakers’ arguments against the President,” the statement said, citing errors and changes in the impeachment documents.
The first attempt to remove Lasso last June amid a violent indigenous uprising received 80 votes. Lawmakers need the votes of 92 of the 137 MPs to replace him with Vice President Alfredo Borrero.
This time, “obtaining court approval is an important milestone in the process that significantly increases the likelihood that the National Assembly will approve the impeachment process,” Barclays analyst Alejandro Arreaza said in a note.
US dollar bonds maturing in 2030 were the worst performers among emerging markets on Thursday, according to data compiled from a Bloomberg index. Debt plummeted nearly 4 cents to 44 cents, the lowest in nearly six months.
According to data from JPMorgan Chase & Co., investors require 19 percentage points more yield than US Treasuries to hold Treasuries, which is well above the threshold for a debt to be considered non-performing.
Lasso can step in at any time to dissolve the legislature, putting lawmakers’ jobs at risk as the decision would trigger snap elections.
Juan Fernando Flores, congress leader of the ruling CREO party, said Tuesday Lasso’s priority will be defending himself against the allegations rather than dissolving the congress. The full impeachment process will take at least 45 days, he added.
Should Lasso dissolve the National Assembly, he could govern by executive decree, subject to review by the Constitutional Court. Hostile opposition has blocked most of his initiatives, including attempts to attract more foreign investment through legislative reforms.
The vote on impeachment “will not take place if President Lasso believes he will lose,” said Morden of Santander, who noted that the decision by decree would give the leader more flexibility in formulating his policies.
Indigenous leaders warned they could take to the streets again if Lasso dissolves parliament. An opinion poll conducted in March by polling firm Click Report found that most voters overwhelmingly rejected prominent politicians, including Lasso, Correa, PSC leader Jaime Nebot and Leonidas Iza, president of CONAIE, Ecuador’s largest indigenous organization.
Original Note: Constitutional Court of Ecuador Allows Lasso Impeachment Proceedings (1)
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