Ecuador’s fiscal outlook is fragile despite IMF support and ongoing consolidation efforts. Public debt stands at approximately 49% of GDP, with external debt ratios improving but still elevated for a dollarized economy. The country risk premium remains high, reflecting investor concerns over fiscal sustainability and energy crises. Corporate default probability is also very high, and the business environment is marked by difficult access to financial information and lengthy debt collection processes. The insolvency framework remains weak, with over half the workforce in informal employment and 97% of formal businesses classified as micro or small enterprises. The government’s commitment to IMF-backed reforms and debt-for-nature swaps has helped stabilize reserves, but liquidity risks persist, especially given low foreign exchange reserves covering only a few months of imports. Access to international markets remains constrained, and financing needs are met primarily through multilateral loans and debt swaps.

Ecuador’s business environment is challenged by rigid labor regulations, barriers to private sector development and pervasive informality. Corruption, opaque public procurement and state interventionism undermine competitiveness and investor confidence. The country scores below average in structural readiness and prevention indicators, with frequent disruptions from extreme weather, seismic activity and energy shortages. While sectors like agribusiness, mining and tourism offer growth potential, they remain exposed to environmental shocks, social unrest and regulatory uncertainty. The government is prioritizing reforms to improve the insolvency framework, promote competition and attract private investment, but progress is slow. Women and marginalized groups face significant disadvantages in employment, and poverty rates remain high, with one in four Ecuadorians living below the national poverty line.

Political stability has improved following President Noboa’s re-election and his party’s stronger legislative position, but governability remains fragile due to reliance on coalitions. Security risks are acute, with Ecuador recording the highest homicide rate in Latin America and ongoing gang-related violence. The government’s militarized response to crime, including plans for maximum-security prisons, faces civil society backlash. Diplomatic tensions, such as the Mexican embassy raid in 2024, have damaged Ecuador’s international reputation. While the risk of foreign payments interruption remains generally low due to dollarization, the lack of liquidity, a discontinuous track record on payments and social unrest may trigger insolvencies, especially if economic expectations are unmet or austerity measures deepen hardship. Energy shortages, unemployment and persistent violence will continue to test the administration’s stability and popularity through 2026 and beyond.