Ecuador Constitutional Court Lets Lasso Impeachment Proceed

Ecuador’s bonds slumped after the Constitutional Court said late Wednesday it will allow the congressional impeachment trial of President Guillermo Lasso to go ahead.

(Bloomberg) — Ecuador’s bonds slumped after the Constitutional Court said late Wednesday it will allow the congressional impeachment trial of President Guillermo Lasso to go ahead.

Judges voted 6-3 to clear the way for the National Assembly to seek to remove one of Latin America’s few market-friendly presidents from office less than halfway into his four-year term, the court said in a statement.

“Despite expert views that the allegations did not meet the legal and constitutional requirements, the court succumbed to pressures for a political as opposed to a technical decision,” said Siobhan Morden, managing director of Latin America fixed income strategy at Santander, via email.

An opposition coalition of left-wing supporters of former President Rafael Correa, the conservative Social Christian Party and dissidents of center-left parties accuse Lasso of having negligently allowed corruption in the public administration.

Lasso has called the accusations unfounded and says they fail to meet legal grounds to impeach him. His administration said in a statement overnight that it respected the court, but disagreed with the ruling. 

“This decision in no way validates the arguments made by the legislature against the president,” according to the statement, which cited errors and changes in the impeachment documents.

The first attempt to remove Lasso last June amid a violent Indigenous uprising obtained 80 votes. The legislature needs the votes of 92 of 137 lawmakers to replace him with Vice President Alfredo Borrero.

This time, “obtaining court consent is a key milestone in the process which markedly increases the likelihood of the impeachment being approved by the National Assembly,” said Barclays analyst Alejandro Arreaza in a note.

The nation’s dollar notes due in 2030 were the worst-performing in emerging markets on Thursday, according to data compiled from a Bloomberg index. The debt slumped by nearly 4 cents to 44 cents, the lowest in almost six months. 

Investors demand an extra 19 percentage points in yield over comparable US Treasuries to hold the sovereign notes, according to JPMorgan Chase & Co. data — far past the threshold for debt to be considered in distress. 

Lasso can step in at any moment to dissolve the legislature, putting lawmakers’ jobs on the line as the decision would trigger early elections. 

Juan Fernando Flores, the leader of the president’s CREO party in congress, said Tuesday that Lasso’s priority would be to defend himself from the accusations rather than shutting the congress. The whole impeachment process will take at least 45 days, he added.

If Lasso were to dissolve the National Assembly, he would be allowed to govern by executive decree, subject to review by the Constitutional Court. The hostile opposition has blocked most of his initiatives, including his attempts to attract more foreign investment through legal reforms. 

The impeachment vote “will not happen if President Lasso thinks he will lose,” said Santander’s Morden, who said governing via decree would afford the leader more flexibility in his policymaking.

Indigenous leaders have warned they could take to the streets again if Lasso were to close the parliament. A March opinion survey by pollster Click Report said most voters rejected prominent politicians including Lasso, Correa, PSC leader Jaime Nebot and Leonidas Iza, president of CONAIE, Ecuador’s biggest Indigenous organization, by wide majorities.

(Adds bond pricing and analyst comments throughout. Adds statement from presidency in fifth and sixth paragraphs.)

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