Prof. Steve Hanke, who 14 years ago was the chief intellectual architect of Ecuador’s points out that Dollarization brought great benefits to the Ecuadorian people.
Now that there is a growing pressure from the government to totally quit Dollarization, Prof. Hanke says that going off the dollar will also have terrible consequences for Ecuador’s economy:
“If you go off, the fiscal deficit gets bigger, the level of debt gets bigger, inflation goes up and economic growth goes down. All the economic indicators just go south.”
Ecuadorians are perfectly aware that dollarization has enabled them to import a vital element of the rule of law, one that protects them from the grabbing hand of the State. And that’s probably the main reason why recent polling results show that dollarization is embraced by 85% of the population.
The Ecuadorian government e-money initiative is about to have a wider institutional involvement following a government directive. This same initiative was the primary cause for the government outlawing Bitcoin earlier this year.
According to a report by Pan-Am Post’s Belén Marty, the country’s banks were ordered late last month to adopt the new payment system within the next year. It seems that the nation’s central bank has given them 360 days to get on board, with a mandate released on May 25 in the official register.
The resolution gives a sweeping and vague definition of “macroagents” for adoption: Companies, organizations, and public or private institutions; financial institutions of the popular and cooperative system; that maintain a network of establishments available for clients and are capable of acquiring mobile money, distributing it, or converting it into varieties of money.
So, in a final analysis, it’s assumable to think that if the dollar is taken out of the picture, the protection from “the grabbing hand of the State” is completely erased. To make matters worse, the Central Bank of Ecuador (BCE)’s crypto-currency transactions will carry no privacy.