Dollarization depends on the flow of foreign currency, warns the Minister of Economy. Wrong decisions of the Assembly would put it in check. Despite being in place for 24 years, we have not yet learned to live with dollarization. We take advantage of it, but we don’t follow the rules to make it work properly.

Again “for dollarization”

Dollarization was born supported by a boom in oil revenues. At the same time that we were dollarizing, Gustavo Noboa managed to overcome the resistance of Petroecuador so that the oil entrepreneurs would build the pipeline and pump their oil. A greater inflow of oil currencies stimulated economic growth. Then Palacio and Correa confiscated the private oil companies, which was bread then and now hunger, since oil investments dried up and compensation had to be paid. When the state finally decided to invest in ITT, the only undeveloped production field, the Constitutional Court managed to order its immediate closure and dismantling of the infrastructure. Meanwhile, Petroecuador does not call for tenders to attract private investment in the search for crude oil. Ecuador has a privileged oil potential that it tends to squander.

Same with mining. In Ecuador, mining is considered harmful to the environment and could motivate ancestral peoples to modernize, with the priority of those enforcing the law being to keep indigenous peoples frozen in the past, thereby slowing investment in their territories. We are leaving a clear path for illegal mining that does not comply with environmental, labor and tax regulations.

How to finance the ‘war’ and the rest?

Private exports are limited to products in which we have a competitive advantage, such as shrimp, bananas, cocoa, tuna and flowers, because we are very expensive to produce other types of products. This is due to the issuance of the Ecuadorian dollar under Correismo. Monetary emission without collateral creates inflation. When one’s own currency is issued, adjustment comes through devaluation. But with foreign currency, the country has to go through a painful process of domestic price reduction and economic stagnation. Result: the most dynamic is the export of labor force, remittances from emigrants.

In dollarization, expenditures are automatically adjusted to income. Since the public sector lives in constant expansion with a gigantic bureaucracy and salaries higher than those of the private sector, it devours the resources of the private economy and also requires external loans for its current expenses. And now the payment of a foreign loan has become more expensive due to the rise in international interest rates.

All this means that the pressure is a net outflow of foreign exchange that leads us to stagnation. This year, the economy would grow less than the population. Therefore, a drastic reengineering of the public sector is needed to reduce its current consumption, improve the functioning of public enterprises and open the door to investments not only in oil and mines. Stagnation can be reversed, but with some political actors interested in collapse, others who only see their own short-term interests, and an overwhelming majority of the electorate that does not understand what is happening, a storm is brewing that could force de-dollarization. (OR)