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Pastimes : The Naked Truth - Big Kahuna a Myth -- Ignore unavailable to you. Want to Upgrade?

To: Lucretius who wrote (23918)	3/9/1999 9:10:00 AM
From: John Pitera	Read Replies (1) \| Respond to of 86076

Luc, where you SOuth of the Border last night.....instilling fear in the poor peasants heads.... he he he I see you are using the darkside once again. March 9, 1999 Ecuador Shuts Banks to Steady Economy Amid Concerns Over Currency, Inflation By THOMAS T. VOGEL JR. Staff Reporter of THE WALL STREET JOURNAL Ecuador's government declared a one-day banking holiday Monday morning as the country struggled to deal with a plunging currency, fears of sharply higher inflation, and weakness in its banking system. "Ecuador's superintendency of banks declared a banking holiday ... with the goal of preserving the stability of banking reserves, limiting the withdrawals that could affect the domestic financial system, and avoiding pressure on the currency and the continued rise in prices," said Ecuador's banking superintendent, Jorge Egas, on television early Monday. The surprise announcement comes after a 26% decline in the value of the currency, the sucre, in relation to the U.S. dollar last week alone. In less than a month, the sucre has lost about 42% of its value. Last month, Ecuador devalued the sucre for the third time in a year. Soon after, it allowed the currency to float freely after abandoning a trading-band system. Ecuador's stock, bond and foreign-exchange markets were also closed in addition to the country's banks. Monday in New York, some of the country's foreign bonds traded at default levels, traders said. The announcement sparked a swirl of speculation, none confirmed, that the government was considering freezing dollar-denominated deposits and imposing capital controls. Just last week Ecuador's central bank denied it was considering such moves. However there appears to have been heavy demand on Ecuadorean banks last week as depositors yanked dollar holdings. The government has intervened in seven financial institutions over the past year and spent hundreds of millions of dollars to keep some of them afloat. According to central bank figures provided by analysts, about 15% of dollar deposits were withdrawn from Ecuadorean banks between the end of January and Friday. What's more, some analysts believe many depositors may be shifting money from smaller banks they believe to be weak to larger, primarily foreign, banks. Data showing weekly deposit activity for individual Ecuadorean banks isn't readily available. The bank holiday move could buy the government time to address the financial damage and cobble together some sort of agreement with opposition political parties to support emergency measures. The government of President Jamil Mahuad has faced fierce opposition in Congress to tax measures designed to raise revenue and help close a current-account deficit that amounts to more than 11% of gross domestic product. The current account is a broad measure of trade and debt-servicing costs. Last week Mr. Mahuad announced some spending cuts, but the free fall of the sucre continued. Mr. Mahuad has called the economic, and now financial, crisis facing Ecuador the worst in 70 years. Massive damage by the El Nino weather phenomenon and a sharp drop in world oil prices broadsided the country just when it was starting to make moves to open its economy and rationalize spending policies after years of corruption and poor management. The country is hoping for loans from the International Monetary Fund and other multilateral lenders to help it cover $1 billion in foreign-debt payments and close a $700 million fiscal gap for this year.