Ecuador has deserved political notoriety – seven presidents have governed since 1996. This political instability has been linked to who sways the indigenous Indian constituency, to who keeps multi-nationals in their pockets, to who can paint his face on the most crumbling walls. These discussions, however, are only interesting when being held over a jug of gluwin. Independent of social drinking, the most interesting Ecuadorian political decision was the recent one to dollarize the economy.
Late in the 90’s, Ecuador suffered economic freefall as El Nino and falling petroleum prices knocked the bottom of the economy that relies 40% on exported oil. The banks then skipped gaily down the rocky road of general collapse, and in 1999 Ecuador defaulted on its external debt. The then-president, Jamil Mahaud, announced dollarization. This annoyed quite a few people, and was followed in January 2000 by the predictable coup. This bunch proved inept, and the then-vice-president Gustavo Noboa borrowed the reins indefinitely. Are you keeping up?
In March 2000, the Ecuadorian sucre was no more and the dollar came into currency. This means the USA economy receive benefits of seigniorage – this basically means that the Americans get paid for each note or coin in use. Not perhaps very ethical to take royalties from a poor, economically devastated country, but that’s capitalism for you.
The economy stabilized and climbed back to its pre-crisis levels – but Ecuadorians are still, for the most part, poverty-stricken, with no financial security. Even worse, they have the quintessential representative of the USA – the greenback – breathing down their necks.
In typical Ecuadorian fashion, though, the people have refused to simply take that lying down. They have created little coins and notes that do not exist in the USA system and confuse the hell out of Americans who belly-ache about the odd change they are given. Let’s hear it for the small victories.