Arauz advances to Ecuador presidential runoff, second spot too close to call

"We expect Arauz to be considerably more pragmatic than the market initially thought." Ecuador's 2040 bond added around 9% last week , according to Refinitiv data. Perez and his supporters began a vigil on Sunday night outside a Quito hotel where election authorities were counting votes, vowing to prevent voter fraud.

Leftist Ecuadorean economist Andres Arauz was headed on Monday for a presidential run-off election, while a surprise surge in support for an indigenous anti-mining activist made the race for the number two spot too close to call. Indigenous leader Yaku Perez shocked the establishment by placing neck and neck with pro-market candidate Guillermo Lasso for second place and the right to stand against Arauz in the April 11 run-off.

With nearly 98 percent of the vote counted, Perez led Lasso by less than a quarter of a percentage point, making a recount likely. Arauz had 32.19%, Perez 19.81% and Lasso 19.60%. It marked the best-ever showing for an indigenous presidential candidate and throws open a race that had been defined for months by the ideological rift between free marketeers and socialists.

Prices for Ecuadorean debt remained steady, with financial markets already expecting Arauz would move ahead. Arauz had sparked a bond sell-off in January by saying he would refuse to recognize a $6.5 billion IMF financing package. But prices rallied last week after Arauz explained to investors that he would in fact renegotiate the deal.

"We think Arauz's willingness to cooperate with the IMF and seek a new agreement is rather positive," said Carlos de Sousa, emerging market debt portfolio manager with Vontobel Asset Management. "We expect Arauz to be considerably more pragmatic than the market initially thought." Ecuador's 2040 bond added around 9% last week , according to Refinitiv data.

Perez and his supporters began a vigil on Sunday night outside a Quito hotel where election authorities were counting votes, vowing to prevent voter fraud. Lasso, in a celebratory rally in his home city of Guayaquil, vowed that a full review of poll statements would show he would make the runoff.

Either candidate could request hand recounts. Arauz, 36, a protege of former president Rafael Correa, has promised to make direct cash payments of $1,000 to 1 million families upon taking office.

Lasso has promised to spur the economy with increased foreign investment and tax reductions. Perez's activism has focused on protecting rivers from mining. He has promised to balance the country's fiscal accounts by recovering funds stolen under previous governments.

Also making a surprise showing was little-known businessman, Xavier Hervas, a center-left candidate who drew 16% of the vote despite never having run for office. President Lenin Moreno, a former Correa ally who was elected in 2017, did not seek a second term.

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