Economy

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
Mauricio Ríos García

-OpEd-

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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La Sagrada Familia Delayed Again — Blame COVID-19 This Time

Hopes were dashed by local officials to see the completion of the iconic Barcelona church in 2026, in time for the 100th anniversary of the death of its renowned architect Antoni Guadí.

Work on La Sagrada Familia has been delayed because of the pandemic

By most accounts, it's currently the longest-running construction project in the world. And now, the completion of work on the iconic Barcelona church La Sagrada Familia, which began all the way back in 1882, is going to take even longer.

Barcelona-based daily El Periodico daily reports that work on the church, which began as the vision of master architect Antoni Gaudí, was slated to be completed in 2026. But a press conference Tuesday, Sep. 21 confirmed that the deadline won't be met, in part because of delays related to COVID-19. Officials also provided new details about the impending completion of the Mare de Déu tower (tower of the Virgin).

El Periódico - 09/22/2021

El Periodico daily reports on the latest delay from what may be the longest-running construction project in the world.

One tower after the other… Slowly but surely, La Sagrada Familia has been growing bigger and higher before Barcelonians and visitors' eager eyes for nearly 140 years. However, all will have to be a bit more patient before they see the famous architectural project finally completed. During Tuesday's press conference, general director of the Construction Board of the Sagrada Familia, Xavier Martínez, and the architect director, Jordi Faulí, had some good and bad news to share.

As feared, La Sagrada Familia's completion date has been delayed. Because of the pandemic, the halt put on the works in early March when Spain went into a national lockdown. So the hopes are dashed of the 2026 inauguration in what would have been the 100th anniversary of Gaudi's death.

Although he excluded new predictions of completion until post-COVID normalcy is restored - no earlier than 2024 -, Martínez says: "Finishing in 2030, rather than being a realistic forecast, would be an illusion, starting the construction process will not be easy," reports La Vanguardia.

But what's a few more years when you already have waited 139, after all? However delayed, the construction will reach another milestone very soon with the completion of the Mare de Déu tower (tower of the Virgin), the first tower of the temple to be completed in 44 years and the second tallest spire of the complex. It will be crowned by a 12-pointed star which will be illuminated on December 8, Immaculate Conception Day.

Next would be the completion of the Evangelist Lucas tower and eventually, the tower of Jesus Christ, the most prominent of the Sagrada Familia, reaching 172.5 meters thanks to an illuminated 13.5 meters wide "great cross." It will be made of glass and porcelain stoneware to reflect daylight and will be illuminated at night and project rays of light.

La Sagrada Familia through the years

La Sagrada Familia, 1889 - wikipedia

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