Ecuador Living

There has been some confusion about the new Sucre in Ecuador.

Ecuador is such a beautiful place. Here is a shot of Mt. Cotacachi from our Cotacachi house and

Mt. Imbabura.

One really great thing is that one can kickback and stop thinking about politics.  Little political has much impact on the day to day life of the individual expat.

However some seem to want to worry anyway so a  number of readers sent me a news article entitled “Venezuela and Ecuador Conduct First Transaction in SUCRE” worrying that a new currency had been introduced without their knowing.

Until 2000 Ecuador’s currency was the Sucre.  Then Ecuador dollarized and its currency became the US dollar and the dollar remains Ecuador’s currency.

There is NOT a new currency for Ecuador.

The article says: On Tuesday, July 6 the governments of Ecuador and Venezuela conducted the first transaction through the Unified System for Regional Compensation (SUCRE, Spanish acronym), a proposed regional currency for the member countries of the Bolivarian Alliance for the Peoples of Our Americas (ALBA).

“The SUCRE is an example of efficiency and the political willingness to define concrete projects,” said Venezuelan President Hugo Chávez.

The technology manager of the ALBA Bank, Edwin Duarte, explained that the transaction in the new currency took place through an “Online web system that provides accountant authorization in every country. Once the transaction is approved, the Central Bank of Ecuador receives the amount,” he added.

After the purchase from Caracas, the state-owned channel VTV broadcasted the confirmation of the transaction from Quito, Ecuador. An official from the BCE confirmed that the “the transaction was successfully accomplished (…) I confirm the reception of the money. The SUCREs were transferred.”

The SUCRE was approved in an agreement to establish it as the trade currency among Bolivia, Cuba, Ecuador, Honduras, Nicaragua and Venezuela.

Many readers also write to me worrying that Ecuador will leave the greenback and create its own currency not realizing that if Ecuador leaves the US dollar this will be good for expats.

I do not think that Ecuador will unhinge from the US dollar any time soon.  First, Correa  has stated the country will not.  Of course I am thinking beyond any politician’s word.

If there is to be a new sucre  then it would be sure to fall versus the greenback…. a political embarrassment that would also make goods from the US become more expensive.

Keep in mind Correa is an economist.  In 2005, he was the economic and finance minister under President Alfredo Palacio. To create a sucre and link it to the US dollar while the greenback is strong would make Ecuadorian exports uncompetitive.  If I can figure this out… he certainly has as well.

More importantly a new Ecuador currency could give Ecuador’s Congress more power and Correa less power.

Currently if Congress wants to implement any new program, it has the restraint of having to have the money to pay for it and Correa.  A new currency would allow Congress to print money which they currently cannot do.  And Correa’s government is already in trouble with Ecuador’s Congress.

This last Tuesday, members of Correa’s party in the legislature failed to pass a controversial monetary reform bill that would use Central Bank deposits to fund investment projects. In short he was trying to do the same thing as print money and Congress stopped him.

Correa’s party, could only muster 59 votes.  63 votes were required to pass the law. This is the second defeat for Correa’s party in the legislature in recent months. In May he could not secure enough votes to overhaul water usage.

The proposed monetary reform would have given more discretionary power to the Central Bank, reducing its limits on investments and allowing the Central Bank to invest directly in state-owned banks.  Many felt that this would provide liquidity to institutions that had questionable lending policies and high non-performing loan ratios in a non transparent way.

The indigenous protests against Correa’s water laws surely helped defeat them.  Now it is the financial structure opposing him. Correa’s party will probably try to get this monetary policy reform bill applied again soon, plus has other controversial bills that face opposition on hydrocarbon reform, communications and university education.   See more about his political battle with the indigenous at Ecuador Political Tension.

Political analysts say Ecuador might have returned to a long-standing political pattern, where the president is powerful in central government but politically weak in Congress.  This makes it less likely for Correa to do anything that will strengthen his congressional opposition.

However should I be wrong, and Ecuador reintroduces a new sucre as its currency see why a Sucre would be good for gringos at Ecuador and the dollar.

Gary

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Aug. 31-Sept. 1 Ecuador Shamanic Minga

Sept.   2-6   Ecuador Export Tour

Sept.   8-9  Imbabura Real Estate Tour

Sept. 11-12  Coastal Real Estate Tour

Sept. 14-15-16 Cuenca Real Estate Tour

Oct.  7 Quantum Wealth plus International Investing and Business North Carolina

Oct.   8-10   International Investing & Business North Carolina
Oct.   11-12  Travel to Quito and Andean Tour
Oct.  13-14   Imbabura Real Estate Tour
Oct.  16-17   Coastal Real Estate Tour
Oct.  19-20   Quito Real Estate Tour
Oct. 22-23    Cuenca Real Estate Tour

Nov.    4-7   Super Thinking + Spanish Course Florida
Nov.    8-9   Travel to Quito and Andean Tour
Nov. 10-11    Imbabura Real Estate Tour
Nov. 13-14    Coastal Real Estate Tour
Nov. 16-17    Quito Real Estate
Nov. 19-20    Cuenca Real Estate Tour

Dec.   3-5    Ecuador Shamanic Mingo
Dec.   7-8    Imbabura Real Estate Tour
Dec.  10-11   Coastal Real Estate Tour
Dec. 13-14    Quito Real Estate Tour
Dec. 16-17    Cuenca Real Estate Tour