Currency Exchange: Ecuador Adopts the U.s. Dollar
The Conflict
In January 2000, responding to a series of economic crises, Ecuadorian President Jamil Mahuad announced plans to replace the nation's currency, the sucre, with U.S. dollars and to privatize many state-owned enterprises. Within weeks, indigenous groups protesting his economic policies as unfair to the nation's poor forced Mahuad from office. His successor, Gustavo Noboa, however, announced that he would implement the dollarization and privatization policies, which were substantially carried out within the year.
Economic
- Ecuador's government came to rely too heavily on income from oil exports to subsidize domestic spending. When oil prices slumped in the 1980s, successive governments ran up huge budget deficits instead of drastically reducing spending. Calls for austerity in government spending were met with protests that sometimes turned violent.
- The country's foreign debt, at $13.7 billion, is too large for the country's economy to sustain, and Ecuador defaulted to international bond holders in 1999.
- In order to pay off its foreign debt, successive Ecuadorian governments printed up relatively large amounts of sucres, which spurred huge increases in domestic inflation.
Political and Social
