Why Ecuador Leader’s Downfall Makes Investors Nervous

Ecuador President Guillermo Lasso, a wealthy former banker who’s popular among investors, will serve only a few months longer than half of his term after bowing out of snap elections. With momentum favoring left-wing populists, concerns over a return to socialist rule have sent Ecuador’s bonds into a tailspin, leaving them deep in distressed territory.

In May, as Lasso faced impeachment on accusations that he failed to stop an alleged graft scheme at the state-run oil shipping business, he used a clause introduced in Ecuador’s 2008 Constitution that allowed him to dissolve congress. That move triggered snap presidential and legislative elections. The clause, never used before, was designed to avoid a period of protracted political paralysis in the country. With low approval ratings, Lasso on June 2 announced that he wouldn’t participate in the race for the next elections, whose winners will serve out the original terms of office for the presidency and congress. Lasso’s decision to step aside means a new president will take office in December, about 18 months early.