Andean Group - April 2026

Waging several costly battles that are straining the public coffers, Ecuador’s President Daniel Noboa is finding novel ways to stretch scarce resources while seeking to meet strict budget targets agreed with the International Monetary Fund (IMF).

Since first taking office in November 2023, Noboa has found new sources of tax revenue, slashed subsidies, and returned Ecuador to bond markets to raise money. But all of that is not enough to fund the costly war on criminal gangs, bolster the country’s crumbling infrastructure, and maintain social welfare spending. So, under a new law proposed by the Noboa administration and approved by congress on 20 February, the largely opposition-controlled municipalities have been told they must spend more on public works and less on wages of civil servants. Autonomous decentralised governments (GADs) must allocate at least 65% of their budget to investment from 2026, a percentage that will rise to 68% in 2027 and to 70% in 2028. The remainder of the budget may be used for current expenditures, including wages and administrative costs.

The government says it is targeting inefficiency and scores of superfluous bureaucrats locally dubbed ‘pipones’, or potbellied people, who clock in and out but do little or no work. Bloated payrolls mean there is less money to invest in infrastructure or even carry out necessary maintenance, the argument goes. 

Indicative of its controversy and the pushback it received from opposition parties, the bill was approved with 77 votes, the exact number needed for a simple majority. The legislation reforms the territorial organisation, autonomy, and decentralisation code (Cootad).

The ruling centre-right Acción Democrática Nacional (ADN) said the new law would deliver social justice and measurable results, as infrastructure to improve basic sanitation, for example, would be prioritised over bureaucratic expenditures. Several ADN leaders claimed opposition-controlled municipalities used current expenditure for parties, social events, and alleged irregularities.

“They’re confusing autonomy with impunity to do whatever they want,” ADN deputy Xavier Ordóñez told Radio Centro. “If they were to use the money for what it is intended, they wouldn’t lack funds.”

Correísmo, the left-wing opposition movement loyal to former president Rafael Correa (2007-2017) and spearheaded by the Revolución Ciudadana (RC) party, rejected these claims saying that the Cootad reform is unconstitutional and will lead to forced reductions in current spending on education and other basic services. Correísmo controls key municipalities around the country including the capital Quito and Guayaquil, the country’s main business hub. “We’re talking about schools, local education centres, dentists and health centres, where autonomous governments fill the void that the national government leaves,” said RC deputy Cesar Gustavo Palacios. “And this government of Daniel Noboa, which owes US$700m, can’t achieve the efficiency this illegal law supposedly seeks,” he added, referring to overdue payments from the federal government to municipalities.

Critics argue that the law will be difficult to implement in the short-term. The mayor of Quito, Pabel Muñoz (RC), said that to comply with the new Cootad rules Quito would have to re-allocate US$459m of a US$1.04bn 2026 budget that is already in place. The reform has triggered roughly two dozen lawsuits from cities, teachers, labour unions, and from Pachakutik, the political branch of the umbrella indigenous organisation Confederación de Nacionalidades Indígenas del Ecuador (Conaie).  

The Noboa administration already faces numerous lawsuits against its legislative initiatives, from public security to mining. In part that reflects the highly divisive political environment in Ecuador. But there are also allegations that Noboa is using strong-arm tactics and that his lack of dialogue could backfire in the form of growing opposition in congress and on the streets.

Biodiversity bond

      Despite President Noboa’s apparent push to weaken environmental regulations and push hydrocarbon and mineral extraction, Ecuador continues to develop new, market-based mechanisms to help finance conservation in one of the most biodiverse countries in the world. On 6 March the Inter-American Development Bank (IDB) and private bank Banco Bolivariano launched Ecuador’s first biodiversity bond, a US$120m initiative to finance projects in sustainable agriculture, land use, and ecosystem protection. It is reportedly the largest bond issuance of its kind in Latin America and follows previous financial innovations, including the 2023 Galápagos debt swap and a 2024 US$1.5bn debt conversion for Amazon conservation.

      But unlike government-led debt-for-nature swaps, like the 2023 Galápagos deal, this bond is driven by a commercial bank, Banco Bolivariano, directing private capital into conservation projects. That means the government’s debt levels don’t increase and potentially worsen its credit-rating. While this transaction is still relatively small, it opens the door for similar deals in the future.

      “This operation is a milestone for Ecuador’s financial market because it pairs biodiversity conservation with innovative financing solutions. The IDB Group celebrates this partnership with Banco Bolivariano as an example of how private capital can be mobilized to protect the country's natural capital and, at the same time, generate long-term economic and social benefits,” said Ignez Tristao, the IDB Group’s representative in Ecuador.

      Proceeds from the bond will finance projects in the following sectors:  productive land use and agriculture; sustainable production in freshwater and marine ecosystems; waste and plastics management; forestry activities and plantations; and tourism and ecotourism services.

      IDB Invest subscribed US$50m. The remaining capital was contributed by the International Finance Corporation (IFC) with another US$50m, and the Dutch development bank (FMO) with US$20m. Banco Bolivariano’s Biodiversity Finance Framework operates under the principles of the International Capital Market Association (ICMA), which helps ensure that the funds are allocated to activities with a positive and measurable environmental impact.

Environmental accounting

Ecuador’s central bank will start measuring the contribution of ocean resources to the country’s economic development, the latest of several moves to highlight that environmental degradation has an economic cost. As part of the initiative dubbed Ecuador’s Oceanic Thematic Account, the country’s top monetary authority will measure the “contribution of marine natural capital to the gross domestic product, recognising that economic growth must consider the sustainability of ecosystems present in coastal, marine, and oceanic zones”. The bank runs similar statistics on the Exclusive Economic Zone, the maritime region surrounding the Galapagos islands, as well as on the contribution of biodiversity and the use of biological resources in the economy.