Bank runs, riots, in Ecuador. Could this be a preview of Y2k ?greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Ecuador has recently been in a state of serious disruptions. The government has frozen bank accounts over 500.00 for a year. This was in response to bank runs and to prevent a financial meltdown. The price of gasoline has increased by 165%. There have been riots in the streets organized by the countries labor unions. The military was called in to bring order. 235 arrested and 19 injured. The cause for this is because of a 2.6 billion dollar debt caused by damage from El nino and low oil prices. While this is not caused by any Y2k scenarios, one has to wonder what will happen to this country when y2k does cause further disruptions. I am basing that assumption on our governments report on the lack of preparation in other countries. Will the turmoil in Ecuador have any effect on neighboring countries that do business with them? Can something like this happen in the United States if our citizens decide to take money out of the bank? I see what is happening in Ecuador and think that we (our nation) better not get too cocky....it could happen here. I suppose that's why our banking industry and government have been pushing the message that everything is going to be okay so hard. My information on Ecuador came from Associated Press and Rueters news reports.
-- B.Clark (email@example.com), March 22, 1999
so where's the links, Clark?
-- Mouse (firstname.lastname@example.org), March 22, 1999.
Was not most of the damage in Ecuador caused by one storm? Have not our governement told us to prepare, as for a storm? Are they not always right? [just ask them]
-- preparing (email@example.com), March 22, 1999.
It's not a preview of y2k or anything else, just a long-running movie of another fxxxed-up South American country.
-- M. Thumper (firstname.lastname@example.org), March 22, 1999.
Sorry cheese, I got the information thru AOL'S news area/international. I went back today to see if I could give a link, but I didn't see anything to link it to. Thumper, I did not say that Ecuador's troubles were caused by Y2k. I believe I made that clear. Your are right about the government which I think validates my point about what further disruptions could occur with Y2k added to the mix. The senate report, among others, have stated that many other countries are very vulnerable to y2k disruptions. What will happen to a country already in distress if you add on another major obstacle and how will that in turn affect its trade partners?
-- B.Clark (email@example.com), March 22, 1999.
Clark is completely correct in his information. There was a thread about this some time ago. It's also been on csy2k. The URLs often go dead fast. That's why it's a good idea to post the relevant text. The previous threads do have the URLs + text on them. We also had threads comparing Y2K possible effects with Hurricane Mitch. You'll have to dig thru the archives ...
xxxxxxx xxxxxxx xxx
-- Ashton & Leska in Cascadia (firstname.lastname@example.org), March 22, 1999.
Here's another recent article on Ecuador. They are indeed having hard times.
Ecuadorans feel sting of austerity
President's measure aims for stability but results in unrest
By David Koop
March 24, 1999
QUITO, Ecuador - The row of single mothers straggled out of the small Quito garment factory. They had come to sew shirts, but there were no orders to fill. Rows of aging sewing machines on chipped school desks sat idle.
Since President Jamil Mahuad announced a harsh austerity package this month, the number of orders Martha Vallejos' small garment factory receives has fallen from 400 a week to zero.
"Demand has died. Nobody has money. I no longer dream of profit, only surviving the crisis," said Vallejos, who employs 30 women, all single mothers.
Ecuadoran industry - from small businesses to large textile factories - is in crisis, choked by harsh austerity measures, partially frozen bank accounts and a collapsing currency, business owners say.
Most damaging to businesses was the government's decision to freeze all dollar checking accounts over $500 for one year and most accounts in sucres, the country's currency, for six months to a year to protect a run on deposits in Ecuador's shaky banks.
The government also doubled gas prices, setting off a strike by bus and taxi drivers who paralyzed the country for three days, blocking roads with taxis and burning tires. Factories could not distribute their goods.
The protests diminished after Mahuad revoked the gas price increase last week in exchange for promises from leftist and center-left legislators to pass tax increases needed to ease a mammoth budget shortfall.
Vallejos had $10,000 frozen by the measure for a year - money earmarked for workers' wages and to pay a button supplier. She is now trying to negotiate a solution with her bank.
Texsa S.A. on Quito's southern outskirts employs 150 workers to make acrylic yarn. Texsa President Monica Sevilla said 50 percent of her company's working capital has been frozen for a year. All Ecuador's textile companies are in similar situations, she said.
"We will have to cut our costs to a minimum. Forget buying new machinery, investing or upgrading. This has been a brutal blow to the industry," she said. "We have enough money to pay workers their 15- day salaries, but suppliers will have to wait."
Almost all of Texsa's buyers also had money frozen and have canceled orders, causing the company's yarn sales to fall by half in the past week, Sevilla said.
The austerity measures come on top of a deep recession in Ecuador sparked by $2.6 billion in damage by El Niqo's floods last year and by falling world prices for oil, its major export.
The sucre has lost more than 40 percent of its value this year, and importing costs have soared. Economic growth fell to 0.7 percent last year.
In September, Mahuad ended fuel subsidies, causing the price of electricity to rise by 400 percent.
The multiple blows to Ecuadorans' pocketbooks have left them with little money to buy products, owners say.
"We are on the verge of a quasi-collapse of the small-business sector due to these measures," said Raul Mendizabal, director of Quito's Small Business Association.
The banks will pay 40 percent interest on frozen sucre bank accounts, but with inflation at 50 percent and expected to rise, businesses fear that the account freeze will decimate their savings.
"In a year, we could receive a fraction of what we started out with," Sevilla said.
Business leaders recognize that the crisis is a product of years of government mismanagement that has left Ecuador with a bloated bureaucracy, protected and inefficient industries and a mammoth budget deficit.
"I hope this helps us dig ourselves out of this hole because we are suffering a lot of pain," Sevilla said.
-- Kevin (email@example.com), March 25, 1999.