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Millennial Leader Takes Over Broke and Crime-Wracked Ecuador

Millennial Leader Takes Over Broke and Crime-Wracked Ecuador

(Bloomberg) -- Distressed debt, political assassinations, anti-mining unrest and soaring crime: Ecuador’s problems would be daunting for an experienced statesman. Instead, it is a 35 year-old president, Daniel Noboa, and one of the world’s youngest cabinets who face the colossal task of rescuing a nation at risk of becoming a failed state. 

“A lot of people see youth as a synonym of naivety,” Noboa said in his inaugural speech on Thursday. “For me it’s a synonym of strength to defeat the challenges that are imposed on us.”

Speaking alongside Noboa, President of Congress Henry Kronfle said Ecuador faces “the most serious crisis in our history as a republic”, and said the legislature would seek a multi-party majority to help the government address the security crisis.

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

Investors are skeptical that they’ll succeed in halting the nation’s downward spiral. Before the October election, many analysts predicted that a Noboa win over his socialist rival would spark a bond rally, but so far it has failed to materialize.

Read more: Bond Markets Offer Little Patience for Ecuador’s President-Elect

Latin American 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 aged 36 last year, has seen his popularity plunge early on in his mandate, and has had to appoint more experienced politicians to his cabinet to replace some of the student leaders who helped him to office.

Costa Rica and El Salvador have also elected presidents in their thirties in recent years, while Argentine voters this month backed 53 year-old libertarian economist Javier Milei, who doesn’t have any experience of holding executive office, on a pledge to scrap the nation’s entire economic model.

Noboa’s most urgent task, and the top issue for voters, is curbing the cocaine trafficking and extortion gangs that have overrun the country, causing an increase of more than 300% in homicides over the last five years. He’s said he’ll move the most dangerous offenders to barges in the Pacific Ocean, and get a grip on the prison system after a series of riots and massacres.

Noboa’s 26 year-old party boss in congress, Valentina Centeno, said Wednesday that Noboa will declare a state of emergency to allow the government to pass a tax bill and an energy bill, and to take quick action on crime.

Cash-Strapped

The government’s other urgent task is a stabilization of the nation’s deteriorating fiscal accounts, Hurtado said.

Read more: Murder, Cocaine and Tears: Ecuador Confronts a Perilous Descent

The US-educated Noboa has said he wants to cut taxes to boost job creation and attract investment to energy and tourism. But he’ll take over a cash-strapped treasury that is effectively cut off from global credit markets.

Noboa asked a more senior economist, Cornell-educated Juan Carlos Vega, 51, to be his finance minister, Vega told Bloomberg early Thursday in response to written questions. The president-elect had originally appointed economist Sariha Moya, 35, for the role, then moved her to the planning department the day before his inauguration.

The fiscal situation calls for unpopular austerity measures, which run counter to Noboa’s desire to be reelected in 2025, said José Hidalgo, head of Quito-based economics think-tank CORDES.

To add to the administration’s financial difficulties, the government is about to lose a chunk of oil revenue after voters in a referendum ordered the closing of one of national oil company Petroecuador’s main fields.

“The incoming government faces a more difficult, complicated cash 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 which are necessary for a serious government.”

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

Noboa’s press office didn’t return phone calls or reply to written requests for comment.

Green Hydrogen

Andrea Arrobo, 33, an expert on green hydrogen, takes over the Ministry of Energy and Mining. She also faces a tough challenge as oil and mining, the nation’s biggest and fourth-biggest export industries, face hostility from Indigenous and environmentalist pressure groups, making development of the sector fraught with political risk.

Sade Fritschi, 26, becomes environment minister, a key role in a country where voters recently backed a referendum to restrict gold and copper mining. She’ll also need to protect her native Galapagos archipelago and its unique wildlife against a giant, mostly Chinese, fishing fleet that has operated nearby in recent years.

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

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