why does ecuador use the us dollar
Ecuadoreans waved goodbye to their national currency, the sucre, today,
lamenting the loss of a national symbol but also optimistic that the
adoption of the U. S. dollar will usher in a new period of
stability. While some held mock burials to protest the death of the
116-year-old sucre, other Ecuadoreans praised the Andean
countryБs БdollarizationБ as a way to bolster an economy that nearly collapsed last year. БI think this is great. We finally have a stable currency,Б
said Mercedes Gutierrez, one of over a hundred people
standing in line at a shopping mall to change their last sucres
into dollars. БThis will help the country grow. Б
As of Sunday, the dollar will replace the sucre as EcuadorБs main currency, capping the first phase of the shock move announced in January. Only a few new dollar-pegged sucre coins will change hands with the newly minted pennies, nickels, dimes and quarters that have slowly flooded the country since April when the exchange began. Although prices will be officially in dollars, Ecuadoreans will be able to exchange their sucres for dollars until March. БThis is a good thing for the long term. Everything should stabilize,Б said Christian Mora, a 21-year-old student. President Jamil Mahuad announced EcuadorБs dollarization in January following the countryБs worst economic crisis in decades. The economy contracted 7. 5 percent in 1999, inflation was Latin AmericaБs worst at over 60 percent, and the sucre lost two-thirds of its value. By scrapping the beleaguered sucre for a more stable greenback, Mahuad hoped he could stabilize inflation and draw investment back into the country, kick-starting the economy and creating jobs for impoverished Ecuadoreans. But Mahuad was ousted in a January coup and replaced by his vice president.
So far, inflation has slowed after an initial jump in prices and the economy is expected to grow between 0. 5 and 1 percent this year. But economists say dollarization is still a work in progress that must be backed up by a long list of reforms to guarantee a smooth flow of dollars into the country. Some other countries with similar monetary systems, like Argentina, which pegged its peso to the dollar in 1991, have had a tough time making the measure work. What About Identity? On an emotional level, not everyone was cheerful about replacing national heroes on their currency with U. S. historical figures like George Washington and Abraham Lincoln. Polls have also shown that many oppose the measure because they do not understand it. БThis is a sad day in EcuadorБs history. The country is losing its traditional currency, the sucre, and officially adopting an alien one, the dollar,Б the El Comercio newspaper in its main editorial. About 200 artists and actors carrying anti-dollarization posters held a mock burial of Antonio Jose de Sucre, a revolutionary war hero after whom the currency is named. Radio stations have held commemorative programs all week. One of the countryБs largest indigenous groups has called for a strike to protest dollarization and a series of other economic reforms. Carlos Aldrade, an elderly taxi driver, was simply worried he wouldnБt know how to make correct change. БSee this. This is 1,000 sucres. But IБm not sure what this is,Б he said, thumbing a nickel. US Dollars Replace Ecuador Currency By Carlos Cisternas Monday, Sept. 11, 2000; 6:38 p. m. EDT QUITO, Ecuador The American greenback ruled supreme in this small Andean nation on Monday, the first day of business since it replaced the sucre as Ecuador's national currency.
Dollar bills and bills of larger denominations were abundant. But Ecuadoreans griped about the lack of coins for change and complained that merchants were rounding off prices at the dollar level a sore point in a poor country where more than two-thirds of workers earn less than $30 a month. Newspaper vendors raised the price of papers from 20 cents to a quarter on Monday but often did not have change if the buyer tried to pay with a dollar bill. Shoeshine boys, who charged 4,000 sucres, the equivalent of 16 cents before the sucre went out of circulation at midnight Saturday, were having problems attracting customers because they couldn't make change. "I have to keep taking sucre coins. If I don't, I can't make any sales," said Francisco Quijije, who sells fish stew for $1. 60 a bowl from a street stall in Manta, a port city on Ecuador's Pacific coast. The Central Bank reminded Ecuadoreans that sucres no longer have value for commercial operations but said leftover sucres may still be switched at special locations until March 9. The bank estimated some $20 million in low denomination sucre bills and coins had not yet been exchanged. Ecuador, wracked by political and economic disorder for years, on Saturday completed a six-month transition to making the U. S. dollar its currency. During the transition both dollars and sucres circulated as legal tender, at an official exchange rate of 25,000 sucres to the dollar. Ecuador joins Panama as the only Latin America countries using the U. S. dollar as the official currency. In at least nine other countries around the world, the dollar is accepted as legal tender. Officials hope the switchover will end record inflation running at 104 percent a year, Latin America's highest.
The step is designed to prevent the government from printing excessive money to meet its budgetary needs. Economists blame Ecuador's economic woes on decades of deficit spending. So far, signs indicate the plan is working. Monthly inflation has plunged from 14. 3 percent in January to 1. 4 percent in August. Last week, the Central Bank began distributing coins freshly minted in Canada and Mexico in amounts equivalent to the U. S. penny, the nickel, the dime and the quarter. Ecuador has followed Panama's example in using U. S. bills but minting its own coins. But the new coins, for the most part, are circulating only in large cities. Smaller towns and villages have not yet received them and are trying to make do with small supplies of U. S. coins, which are legal tender along with the new coins. Despite their demise as official currency, sucre bills and coins worth less than $1 were still circulating bills for 20,000 sucres, 10,000 sucres and 5,000 sucres and coins with denomination of 1,000 sucres and 500 sucres. "We're still taking sucres because we can't afford to lose a sale in these difficult times. We're going to get together with other merchants and exchange them at the Central Bank," said Benigno Alcivar, owner of a vegetable stall in a street market in Guayaquil, Ecuador's largest city. Roberto Aguirre, an economist, criticized the government of President Gustavo Noboa for not putting new coins into circulation months ago to provide for enough time for them to reach small towns and rural areas before the currency switch. "There has been a lack of foresight by the government in not providing coins in time and in sufficient amounts," he said.
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