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How Dollarization Saved Ecuador's Economy

When Ecuador ditched its currency for the dollar in 2000, it deprived governments the possibility to overspend, and gave ordinary people control of their money.

Counting dollar bills in a market in downtown Quito, Ecuador
Counting dollar bills in a market in downtown Quito, Ecuador
Mauricio Ríos García


LA PAZ — This month marks 20 years since the most successful monetary policy in Ecuador's history: dollarization and the shutting down the Central Bank. While some still criticize the move, and the former president even tried to reverse it, the economic benefits of dollarization are clear. On this anniversary, it's worth looking more closely at what the move has meant for the country.

Dollarization in Ecuador, which officially took place on Jan. 9, 2000, has been the subject of myths and speculation. The same can be said for the role of the currency and the Central bank in the economy, the nature of inflation, or how exchange rates can affect exports and a country's competitive profile. These have been of relevance at least since the mercantilist system of the 15th and 16th centuries.

Dollarization's first and foremost success since imposed in January 2000, was to check inflation and the so-called "inflation-tax." That is effectively a tax that needs no parliamentary approval and would have allowed someone like President Rafael Correa, who wanted to recover the Sucre currency, to lay his hands on the savings of people forced to use the old currency.

Likewise as the analyst Gabriela Calderón has said, one of dollarization's biggest benefits was to eliminate any possibility of public finances affecting the banking and financial system. With a fiscal crisis equal to or worse than Argentina's today, Ecuador most likely would have had to devalue the Sucre countless times as a public financing mechanism. Dollarization makes it impossible for currency devaluation to slide toward a typical financial crisis.

Private investment would be even more costly with a highly volatile national currency.

Another myth is that dollarization has made Ecuador's productive structure more costly, yielding bad results in terms of competitiveness. Yet if reduced competitiveness were due to the exchange rate, Ecuador could not benefit from the current state of globalization as it does, without dollar-priced products. As in Bolivia, Ecuador's relatively low competitive profile is due to its rigid labor regime, taxes, highly protectionist trade policies, and a hyper-regulated and obsolete banking and financial system. Private investment in Ecuador would be even more costly with a highly volatile national currency.

Why was it practically impossible for Correa to renationalize the currency? Because in contrast with the Argentinian convertibility plan in the 1990s under President Carlos Menem, the dollars were not in the hands of politicians and tax-greedy governments, nor in the banking or financial system — but with ordinary people.

Fortunately, in the same way that it was difficult for countries like Greece and Italy to abandon the euro to recover the drachma or lira to liquidate their bloated debts and pay off deficits, so Ecuador and its politicians were unable to abandon the dollar in recent years. And just like in Bolivia, the biggest risk to the economy now would be to abandon a fixed exchange rate.

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Shame On The García Márquez Heirs — Cashing In On The "Scraps" Of A Legend

A decision to publish a sketchy manuscript as a posthumous novel by the late Gabriel García Márquez would have horrified Colombia's Nobel laureate, given his painstaking devotion to the precision of the written word.

Photo of a window with a sticker of the face of Gabriel Garcia Marquez with butterfly notes at Guadalajara's International Book Fair.

Poster of Gabriel Garcia Marquez at Guadalajara's International Book Fair.

Juan David Torres Duarte


BOGOTÁ — When a writer dies, there are several ways of administering the literary estate, depending on the ambitions of the heirs. One is to exercise a millimetric check on any use or edition of the author's works, in the manner of James Joyce's nephew, Stephen, who inherited his literary rights. He refused to let even academic papers quote from Joyce's landmark novel, Ulysses.

Or, you continue to publish the works, making small additions to their corpus, as with Italo Calvino, Samuel Beckett and Clarice Lispector, or none at all, which will probably happen with Milan Kundera and Cormac McCarthy.

Another way is to seek out every scrap of paper the author left and every little word that was jotted down — on a piece of cloth, say — and drip-feed them to publishers every two to three years with great pomp and publicity, to revive the writer's renown.

This has happened with the Argentine Julio Cortázar (who seems to have sold more books dead than alive), the French author Albert Camus (now with 200 volumes of personal and unfinished works) and with the Chilean author Roberto Bolaño. The latter's posthumous oeuvre is so abundant I am starting to wonder if his heirs haven't hired a ghost writer — typing and smoking away in some bedsit in Barcelona — to churn out "newly discovered" works.

Which group, I wonder, will our late, great novelist Gabriel García Márquez fit into?

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