Ecuador’s ‘mutual death’, external imbalances easing

Ecuador’s political crisis escalated this week after President Guillermo Lasso dissolved the National Assembly to dodge an imminent impeachment vote. Whoever wins the fresh elections, the next couple of years are set to be characterised by looser fiscal policy and a rising debt trajectory, which is likely to keep the country locked out of international capital markets and could cause default risks to intensify in the second half of the decade. Meanwhile, GDP data from Colombia and Chile released this week painted a picture of weakening domestic demand. In Chile's case this has caused current account risks to ease substantially, while the adjustment process in Colombia is proving more gradual.