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Ecuador

Therefore, I think that Ecuadorians should be already very worried that the decision taken by the Congress as it calls it the Trade, it is highly risky for a dollar as the Ecuadorian economy. For those readers who don’t know too much about the economy of Ecuador, I tell them that the Ecuadorian economy is dollarized since 2000 and the decision to implement this economic model is produced in a particular context. For more information see Michael Chabon. The adoption of the use of the American currency in Ecuador occurred then that the country suffered a great economic crisis at the end of the Decade of the 90 and a strong devaluation of the sucre, former currency. In such a situation, the economic system that was finally applied appeared as one of the only viable alternatives to stabilize the economy (perhaps could have opted by the convertibility of its currency the U.S. dollar for having some flexibility and possibility to go back the decision when the internal context improves, but that is another story). So far, with the implementation of this new economic model in which the dollar occupies a central place, to Ecuador It has not done so bad to say.

The economy has been able to grow at a good pace, and fiscal and external accounts have remained in order. We can say that the economy had been disciplined after its decision to use an international reserve currency. It is that the dollarization of the Ecuadorian economy imposes a series of restrictions so that it can be sustained without generating situations of crisis. Among these conditions, discipline in fiscal accounts, and more external price stability are primary issues. And in relation to this last, the use of the U.S. currency has not generated all benefits promised in advance. The inflation rate of the Ecuadorian economy has remained at high levels throughout the period in which the economy adapted the use of American banknote as legal tender.

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