Macroeconomic Forecast Ecuador

In May 2011 Ecuador's international currency reserves were US$2.53bn, down from US$2.80bn in April. Moreover international reserves were down 27.6% year-on-year (y-o-y), in our view representing the increased risk of a dollarization crisis in the economy. While we expect President Rafael Correa to continue imposing import restrictions while looking to tap bilateral lenders for external funding, we believe it is increasingly likely Ecuador will return to international debt markets in 2012 to meet domestic demand for dollars, as we forecast reserves to dwindle to US$1.5bn by end-2011.

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