QUITO (dpa) – For a long time, it appeared that nothing could stop the rapid economic decline in Ecuador.
Three presidents in 42 months had proven themselves incapable of resolving the worst economic and social crisis to hit the South American nation since independence 170 years ago.
But with the introduction of the U.S. dollar as the sole currency in September, a surprising degree of stability has been restored.
Hyperinflation, corruption, the collapse of the banking system and a revolt by the impoverished Indian population had driven Ecuador to the brink of disaster.
Large segments of the population were forced to live on the equivalent of 20 dollars a month, well below the poverty line.
Against this background, the government decided to replace the sucre, the national currency, with the dollar.
Initial fears that the controversial move would spell an end to national values have subsided.
Ecuador’s 12.6 million population grew accustomed to the new currency with amazing speed, and the process of changing bank accounts and prices passed off smoothly.
Today, only a few of the older inhabitants work out prices in sucres before paying in dollars.
Inflation did not disappear overnight, but it is dropping, according to government statistics. Since the currency change was first announced in January, prices have risen 85 per cent. But the rise has been only eight per cent since the changeover in September.
Another factor which helped price stability was the global increase in oil prices. This brought a windfall in export earnings for oil-producer Ecuador.
President Gustavo Noboa has also proved a blessing. Noboa took office in January after his predecessor Jamil Mahuad was forced to flee the country by young military officers after a rebellion by the dissident indigenous population.
Noboa’s quiet and unpretentious way of doing business has won him great respect and popularity. A recent survey showed 70 per cent of the population was content with his performance.
Parliament did not fare so well in the survey as 92 per cent of those questioned blamed the legislature for the country’s woes.
Mahuad and the president before him, Abdala Bucaram, are both being sought under international arrest warrants.
The charges against Mahuad relate to the forced closure of all the country’s banks and the freezing of accounts for nine days last year. Three million people lost their savings as a result of the action.
Mahuad is also accused of helping himself to public funds.
For 2001, the government has set a goal of reducing the annual inflation rate from 110 per cent to 60 per cent. It also hopes to achieve an economic growth rate of 2.5 per cent and balance the budget.
This could be hampered if oil prices continue to slump as they have done towards the end of 2000, dropping from 30 dollars a barrel to 20 dollars.
Oil revenues make up more than 46 per cent of the national income.
The oil price decline has already claimed its first victim – Economy Minister Luis Yturralde. The minister resigned earlier in December because he did not want to increase taxes to make up for the shortfall in oil revenue.
Such an increase was demanded by the International Monetary Fund as a condition for granting a standby credit of 304 million dollars.
