OT?: Ecuador in Crisisgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Monday January 10 12:15 AM ET Mahuad Dollarizes Ecuador to Fight Crisis By Gustavo Oviedo
QUITO, Ecuador (Reuters) - Ecuadorean President Jamil Mahuad, besieged by protests to force his resignation, announced on Sunday the dollarization of the economy and that all ministers had submitted their resignations to allow him greater freedom of maneuver.
``After a two-month analysis I have reached the conclusion that the dollarization system...is the way out for us and whereby we must proceed,'' he told the nation in a speech broadcast on television.
In the same broadcast, he said the cabinet ``has submitted its collective resignation''.
Mahuad said the government will apply an exchange rate of 25,000 sucres per dollar.
He said he had congressional backing for the dollarization, but did not say when the measure would take effect.
Mahuad did not elaborate on the dollarization but the measure basically entails the conversion of sucre-denominated salaries, financial and trade deals into dollars.
The Central Bank ruled out on Wednesday the possibility of dollarizing the economy of this poor Andean nation of 12.4 million people with unemployment running at 17 percent.
However, Mahuad said: ``Ecuador does not need shy measures, but to go to the core of the problems and propose transforming solutions'' and instructed the Central Bank to implement his plan.
The International Monetary Fund No. 2 official Stanley Fischer said Friday in Washington that talks with Ecuador on a 12-month loan agreement were making progress, but recommended: ''It will be important to try to stabilize the currency.''
The embattled Ecuadorean currency ended Friday at 25,100 per dollar, 17 percent lower in the first working week of 2000. It had nose-dived 67 percent through a disastrous 1999.
Mahuad's center-right party Popular Democracy is the largest force in congress but it does not have the majority.
But his government held intense contacts with opposition forces through the day seeking backing for the dollarization.
The economy is believed to have shrunk 7.3 percent last year, while 1999 inflation was 60.7 percent, the highest in Latin America for the second year in a row. The Central Bank on Saturday revised its 2000 inflation target to 65 percent from the 50 percent estimated previously.
Mahuad, a former mayor of Quito, has been struggling to keep the economy afloat and stop the currency from sinking but over recent days has been facing strong pressure from unions and opposition to quit.
Workers from state oil firm Petroecuador have announced an indefinite strike from Jan. 17, giving Mahuad another headache on top of a trade union day of protest on Thursday, another due Jan. 12, and rallies by indigenous groups on Jan. 15.
Economic woes were compounded by destructive El Nino storms in 1998 and weak prices for oil and bananas, which along with shrimp and flowers are among the country's most important exports
Comment: Ecuadoe declared state of emergency on 01/06/2000. Their currency the sucre dropped over 35% since 01/01/2000.
-- Bill P (email@example.com), January 10, 2000
Ecuador was described as a country almost certain NOT to get its Y2K word done, in a long, detailed article that appeared a few months ago (somewhere around October, if I remember correctly) in either the NY Times or Washington Post.
But from this description, it sounds like compliant computers are the least of their problems....
-- Ed Yourdon (firstname.lastname@example.org), January 10, 2000.
Maybe we don't need Cory's y2k trigger after all. The worldwide economy is precarious enough as it is . . . lots of triggers everywhere.
-- J Wheel (email@example.com), January 10, 2000.
What I wonder about are 2nd and 3rd world countries ability to cope with Y2K pre- and post- Y2K remediation costs... Perhaps some of them could go to the IMF, or ask the U.S. for "free" assistance, but not all of them, if many of the smaller countries have troubles managing the burden.
Perhaps they'll just delay paying off the foreign debt, though that would increase the amount of interest they'd have to pay. At the very least, we might well see new and creative forms of bookkeeping to keep the books "in the black".
-- Deb M. (firstname.lastname@example.org), January 10, 2000.
Has a little different wording than the yahoo piece.
State of emergency
A state of emergency has been in force in Ecuador since Thursday, after trades unions and opposition groups began a series of demonstrations aimed at ousting President Mahuad.
Mr Mahuad is under pressure to fix the ailing economy
They blame him for a deepening economic crisis and the collapse of the banking system.
-- lisa (email@example.com), January 10, 2000.
No biggie. The Ecudorian president will step down and live off the billions he stashed out of country (yes, in *gold*). IMF teams will come in and loan the poor bastards whatever sum it is they need to remain solvent for the next quarter. And somehow, Bubble.com will see this as 'good news' and keep expanding.
Man, life is great wearing these new optimist's shoes.
-- Bubblicious (Bubbafirstname.lastname@example.org), January 10, 2000.
Ecuador has already defaulted on their Brady bonds the first country to do so. But no problem, we'll just lend them more and then forgive the debt later on, then we'll pick up a few more countries like Ecuador to do the same thing. Our Bubble.com and rocket chip motivated economy will finance the whole world and if things get a little dicey, well the FED can just inflate the money supply some more, no problems.
Bubblicious - that's funny!
-- Guy Daley (email@example.com), January 10, 2000.
Could this be a part of a multi-step plan to revitalize their economy? Consider:
1) Dollarization. Disband the government
2) Establish interim givernment.
3) Apply for protection/territorial status from the US (security of oil production...)
4) Apply for statehood! (They already use dollars...)
5) Request federal $ for building freeways, post offices, court houses, military installations, etc.
-- Mad Monk (firstname.lastname@example.org), January 10, 2000.
mad monk,no WAY!!!
already is Argentina e Brazil and I do not know what other country in Lamerica dollirized. So do not worry is the only way to trying to stabilize the currency
-- Alex The Italian (email@example.com), January 10, 2000.