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To: Alex who wrote (47281)	1/22/2000 7:59:00 AM
From: long-gone	Read Replies (2) \| Respond to of 116762

OT(?)Dollarization and The Ecuador Coup?s Unlikely Coalition The current crisis in Ecuador was set off by President Jamil Mahuad?s decision to adopt a dollarization plan Stratfor.com By Staff 01/22/2000 Read the original article. -------------------------------------------------------------------------------- The current crisis in Ecuador was set off by President Jamil Mahuad?s decision to adopt a dollarization plan for Ecuador in order to stabilize the economy and bring the nation?s interest rates closer in line with other international rates. In addition, though the government downplayed the connection, the dollarization scheme came while Ecuador was negotiating with the International Monetary Fund (IMF) for a $1.25 billion loan. The economic situation reached a crisis point. The Asian financial crisis and recent U.S.-EU-WTO battles robbed Ecuador of its two most valuable exports ? oil and bananas. Flood damage caused by El Ni¤o further decimated Ecuador?s agriculture industry. Without these sources of income Mahuad was forced to systematically dismantle price controls on foodstuffs and fuel, stoking massive popular resentment. Mahuad planned dollarization to bring the economy out of its depression. Dollarization, if successful, would staunch the spiraling inflation, indirectly helping stabilize food and fuel prices, while reducing the interest rate on international lending to within striking distance of the U.S. prime rate. Unfortunately, the Ecuadorian economy was neither strong nor flexible enough to withstand external shocks without its own monetary supply. To alleviate this problem Mahuad planned to introduce a series of drastic economic reforms. His reform plans would have simultaneously privatized traditional job suppliers such as the telecoms, electricity and oil industries while liberalizing labor laws to weaken unions and ease firing processes. In other areas Mahuad planned to both raise taxes and cut spending. These were not wise political moves considering that two-thirds of the country?s population is either unemployed or underemployed ? and with 10,000 ... stratfor.com