Global Policy Forum

By Carlos Cisternas

The greenback ruled supreme in this small Andean nation yesterday, the first day of business since the American dollar replaced the sucre as Ecuador's national currency.

Dollar bills and bills of larger denominations were abundant. But Ecuadorans griped about the lack of coins for change and complained that merchants were rounding off prices to the dollar - a sore point in a poor country where more than two-thirds of workers earn less than $30 a month.

Newspaper vendors raised the price of papers from 20 cents to a quarter, but often did not have change if the buyer tried to pay with a dollar bill. Shoeshine boys, who charged 4,000 sucres, the equivalent of 16 cents before the sucre went out of circulation at midnight Saturday, were having problems attracting customers because they couldn't make change.

"I have to keep taking sucre coins. If I don't, I can't make any sales," said Francisco Quijije, who sells fish stew for $1.60 a bowl from a street stall in Manta, a port city on Ecuador's Pacific coast.

The Central Bank reminded Ecuadorans that sucres no longer have value for commercial operations but said leftover sucres may still be switched at some locations until March 9. The bank estimated some $20 million in low denomination sucre bills and coins had not yet been exchanged.

Ecuador, wracked by political and economic disorder for years, on Saturday completed a six-month transition to making the dollar its currency. During the transition, both dollars and sucres circulated as legal tender, at an official exchange rate of 25,000 sucres to the dollar.

Ecuador joins Panama as the only Latin American countries using the US dollar as the official currency. In at least nine other countries around the world, the dollar is accepted as legal tender. Officials hope the switch will end record inflation, which is running at 104 percent a year, the highest in Latin America. The step is designed to prevent the government from printing money excessively to meet its budgetary needs. Economists attribute Ecuador's economic woes to decades of deficit spending.

So far, signs indicate that the plan is working. Monthly inflation has plunged from 14.3 percent in January to 1.4 percent in August. Last week, the Central Bank began distributing coins freshly minted in Canada and Mexico in amounts equivalent to the US penny, the nickel, the dime, and the quarter. Ecuador has followed Panama's example in using US bills but is minting its own coins.

But the new coins, for the most part, are circulating only in large cities. Smaller towns and villages have not yet received them and are trying to make do with small supplies of US coins, which are legal tender along with the new coins.

Despite their demise as official currency, sucre bills and coins worth less than $1 were still circulating - bills for 20,000 sucres, 10,000 sucres, and 5,000 sucres, and coins with the denominations of 1,000 sucres and 500 sucres. "We're still taking sucres because we can't afford to lose a sale in these difficult times. We're going to get together with other merchants and exchange them at the Central Bank," said Benigno Alcivar, owner of a vegetable stall in a street market in Guayaquil, Ecuador's largest city.

Roberto Aguirre, an economist, criticized the government of President Gustavo Noboa for not putting new coins into circulation months ago to provide enough time for them to reach small towns and rural areas before the currency switch.

"There has been a lack of foresight by the government in not providing coins in time and in sufficient amounts," he said.