Newsletter
Ecuador Currency: Ecuador Unlikely to Dump Dollar as Currency Anytime Soon
Date: 09/16/2009By Len Galvin
September 16, 2009 -- Ecuador’s socialist president Rafael Correa probably won’t dump the U.S. dollar as Ecuador’s national currency anytime soon.
That’s the opinion of former Ecuador Finance Minister Magdalena Barreiro.
"People remember inflation and not being able to buy a car or get medium- or long-term credit,” says Barreiro, now a finance professor at the University of San Francisco de Quito. “So I expect the dollar to remain popular for the foreseeable future, and as long as it is the president will not get rid of it."
Using the U.S. dollar as the Ecuador currency means Correa’s government can’t devalue the country's currency, print money or raise or lower interest rates, which limits Correa’s financial agenda.
But if the Correa seriously considers getting rid of the dollar, depositor confidence could crumble, inspiring a run on banks. Ecuador has historically deposed presidents in times of economic strife – over the last decade, presidents have served less than two years on average.
For expats in Ecuador, one of the most affordable countries in Latin America, the country’s use of the dollar as national currency means no exchange rate calculations when figuring cost of living and other expenses.