Ecuador

DANIEL.DAVIES at flemings.com DANIEL.DAVIES at flemings.com
Mon Jan 17 10:03:51 PST 2000


As far as I can see off the Reuters, the country is in a pretty bad way, but not very much worse than Mexico in '94 and certainly not as bad as it got in Asia (Russia is another matter). This is exactly the sort of time when the government ought to be keeping its head when all around it are losing theirs, and agreeing a deal -- any deal -- with the IMF, to try to get some sort of finance and let the external balance take the strain.

Instead, they seem to be going ahead with a mad dollarisation plan -- does anyone know if Steve Hanke is in the area? The PetroEcuador strike seems to be related to this plan, which is not exactly calculated to help the worst-off in society. They're demanding the president's resignation, but if Mexico is a precedent, they'll settle for money.

The thing that seems mad to me is that Ecuador has announced reserves of US$1.28bn (up 2.5%). As an import cover figure, I'd have thought that was about 3 or 4 months -- as a money supply for the whole country, it looks woefully inadequate.

On the other hand, assuming that they manage to do a deal with PetroEcuador that keeps the oil flowing, this could very well be the lowest ebb which is the turn of the tide -- Camdessus has just been on the wire saying that the dollarisation idea, while mad, won't jeopardise the EFF. The protests could get nasty, as they are basically organised by the indigenous population, so they can't expect anything like fair or even sane treatment by the police. But in macroeconomic terms, I don't see them as a force.

The boys chatting on "bradynet.com" don't seem to be worrying unduly, and indeed don't think that dollarisation will happen:

http://eve.bradynet.com/cgi-bin/cyberexchange?authorization=GUEST&ticker=ec pdi

dd

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To: lbo-talk at lists.panix.com cc: (bcc: DANIEL DAVIES) bcc: DANIEL DAVIES Subject: Ecuador

Ecuador seems to be blowing up - economic crisis, strikes, protests. Does anyone know what's going on?

Doug

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