Posted On 07 Jan 2020
On Thursday, January 9, 2000 marks 20 years of dollarization in Ecuador. But what did the change in this monetary system imply? Here are some facts:
- To determine that a dollar cost 25,000 sucres, it was necessary to do a thorough job applying formulas that legally and technically could. Without this work on January 10, 2000, the resulting exchange rate would have been 32,411 sucres , according to a study entitled “How was Ecuadorian dollarization done in practice?”, Written in 2017 by Miguel Dávila Castillo.
- The decision to coin their own fractional coins was due exclusively to a cost analysis. For example, acquiring a currency of 25 cents in the United States has, of course, a cost of 25 cents, but putting it in Ecuador increases costs substantially, both for its weight and for the space it occupies in transportation. That is why there are 5 cents, 25 cents and 50 Ecuadorian cents that are valid in the domestic market, not in the world. Hence, foreigners visiting the country must separate Ecuadorian fractional currencies and exchange them before returning to their country of origin.
- In January 2000, the most serious financial crisis of the last 75 years ended.
- The US dollar was already used for financial transactions since the 1990s. But the dollar was adopted as a currency in January 2000.
- In 2000, inflation was 91%, well above the annual index for December 2019, which was -0.07. The country is experiencing an economic contraction that began in 2014 with the fall in the price of oil, which has not yet recovered 100%, despite economic policies. Negative inflation is due to falling sales and constant discounts that seek to encourage trade. The positive is that the salary is not devalued as was the case with the sucre.