(Bloomberg) -- Ecuador’s bonds are plunging after voters unexpectedly spurned President Guillermo Lasso’s proposed constitutional changes, weakening his market-friendly government while bolstering the socialist opposition. 

With more than 98% of votes tallied, Lasso was on course to fail on all eight of his proposed amendments, including one that would allow the extradition of drug traffickers to the US. At the same time, allies of leftist former President Rafael Correa won broad support in local elections — including a mayoral victory in Guayaquil, one of the nation’s biggest cities.

The outcome has shocked both pollsters and investors, with Ecuador’s dollar debt due in 2030 tumbling roughly 14 cents since the Sunday vote to 56 cents, the lowest since November. The extra yield investors demand to hold the nation’s notes over similar US Treasuries widened to more than 14 percentage points, according to JPMorgan Chase & Co. data. 

“When the people speak, it’s the duty of the ruling class to analyze, understand and accept,” Lasso said in a national address Monday night.

The nation’s debt, on average, is handing investors losses of more than 7% so far this year — making it the world’s worst-performing sovereign in 2023, according to data compiled by Bloomberg.

“The president has called for a dialog, but the initial response from the Correista opposition has been that any agreement would need to include calling an early election,” Barclays Capital Inc. economist Alejandro Arreaza wrote in a Tuesday note. 

Rejection of Lasso’s goals increases risk that the leader won’t be able to complete the final two years of his term, according to Barclays.

“The Lasso administration will face a harder political context following Sunday’s elections,” Citigroup Global Markets Inc. strategists led by Dirk Willer wrote in a Tuesday note. “Its governability, which was already weak, will likely deteriorate further.”

As the vote count nears completion, 51.4% of voters have refused the proposal to extradite organized crime bosses, which came amid a surge in drug-related violence. A series of prison massacres and a crime wave have also contributed to a drop in the government’s popularity.

The other amendments, which focused on security, the environment and a plan to reduce the size of the national assembly, were rejected by an even larger margin of voters.

For Siobhan Morden, managing director for Latin America fixed income at Santander US Capital Markets, the results were a “wake-up call” for investors on the risks facing the country. 

“For bondholders, the political setback represents latent policy risk and still high repayment uncertainty of back-loaded bond payments,” she wrote. “It’s difficult to commit to a high conviction view on the evolving risks over the next three years and the varying policy options through the political transition after the Lasso administration.”

(Updates votes in second paragraph and bond prices in third paragraph.)

©2023 Bloomberg L.P.