Dollarization is the opposite of economic interventionism, because it is rather about taking away the power of the political class over the currency used by citizens. It achieves this by eliminating unnecessary and even harmful monetary policies that politicians have abused to play tricks on Ecuadorians. The shield provided by dollarization enabled the longest period of monetary stability in Ecuador’s history. By isolating the currency from the fiscal policy, the ownership rights of citizens over their money were strengthened.

Reserves and dollarization

Dollarization, far from being a fragile monetary system, has proved – for more than two decades – much more robust than the national currency alternative. Those two decades included high volatility such as the rise and fall of oil prices, the Great Recession of 2008-2009, the COVID-19 pandemic, and two violent national strikes. In addition, the country lived with an average fiscal deficit of 4.6% between 2006 and 2022.

While the population grew by roughly 35% between 2000 and 2023, Jaime Carrera, of the Fiscal Policy Observatory, points out that the bureaucracy grew by 82%, going from 270,000 public servants to 492,400 in 2023. Carrera adds that spending on bureaucracy went from 3.9% of GDP to 8.5% in 2023 and believes that this increase was a decisive factor in the fiscal deficit. To that should be added the expenses for the regressed fuel subsidy, which is only equivalent to the projected deficit for this year ($5 billion).

The next Government must pay the Central Bank more than 1,900 million dollars for the loans it gave during the regime of Rafael Correa

It is interesting that during the so-called “golden age of dollarization”—according to Carrera (2000-2006)—or “market dollarization”—according to Alfredo Vergara (2000-2008)—the economy grew at a higher rate, according to Not only was it reduced public debt, but fiscal surpluses were also recorded and significant savings were even accumulated. Given that since 2008, Correa’s administration began to introduce a series of obstacles to trade and capital movement, i.e. “dollarization by 21st century socialism”, we can compare two periods.

During the “dollarization of the market” Ecuador recorded an annual growth of 4.65%; extreme poverty decreased from 28.4% to 7.5% (20.9 points); and the public debt fell from 77% of GDP to 16%. During the “dollarization with SSXXI” (2008-2019, shortening the period immediately before the pandemic to avoid distortion in favor of our argument), annual growth was reduced to 1.95%; poverty reduction slowed from 7.5 to 3.6% (3.9 points); and the public debt increased from 16% to 39.29% of GDP.

A stable currency that is equally valid for all and that retains its purchasing power over time longer than real alternatives expands the economic freedom of individuals to develop their life projects. With a dollarized economy, we are protected from the looting of politicians through inflation. To make better use of dollarization, the next government must promote the internationalization of the financial system and lead the implementation of trade agreements negotiated by the outgoing government. (OR)