CHICAGO, Oct. 16 /PRNewswire-FirstCall/ -- The political risk landscape may change for US-based companies doing business in some parts of South America if Ecuador elects Rafael Correa its next president, according to Aon political risk experts.
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With 60 percent of the vote counted in the first round of Ecuador's presidential elections, Alvaro Noboa, 55, one of the wealthiest men in Latin America, had 27 percent of the vote compared to 22 percent for Rafael Correa, 43. As neither candidate won a clear victory, a run-off election is likely next month.
Correa, an American-educated economics expert who received his PhD from the University of Illinois, is aligning himself with the anti-American rhetoric of Venezuela's President Hugo Chavez. Calling himself a friend of Chavez, who has become Washington's leading antagonist in Latin America, Correa says his government would shutter a U.S. military base in Ecuador, crack down on multinational companies and possibly declare a moratorium on payment of the country's $10 billion foreign debt. If he wins next month, he will join a growing list of left-leaning leaders elected in Latin America since 2002, and may, according to Aon U.S. Trade Credit Managing Director Bryan Squibb usher in an era in which other political candidates see more populist commentary as a sure way to attract a larger vote.
"Most companies doing business in the region are well aware of the region's political trends, analyzing their political risk exposures and buying sufficient cover, so in that sense this development is not a surprise," Squibb says. "However, it could open the door to the sort of arbitrary governmental rulemaking that may make for more complicated relationships between US-based multinationals and local government."
Roger Schwartz, Aon Trade Credit senior vice president, adds that none of the contenders is expected to bring the kind of political and economic stability Ecuador badly needs. "Correa's election is not guaranteed," Schwartz says, "particularly if the vote goes to a second round as polls predict. If the election is extended, then moderate and more centrist politicians may join against him and his contentious project to sideline Congress, redesign petroleum contracts, and refuse to revive free-trade talks with the United States."
However, Schwartz said the Ecuadorian elections are but the latest example of a longer term trend in Latin America that investors worry may lead to threats to oil & gas contracts, mining concessions, unilateral repudiation or rescheduling of foreign debt and a general undermining of foreign investment in the region.
Ecuador's run-off elections are scheduled to be held on November 26.
About Aon
Aon Corporation (http://www.aon.com/) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 46,000 employees working in Aon's 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.
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