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Cost and Benefit of Ecuador’s Dollarization Experience Rubén Berríos* Abstract In 2000, Ecuador adopted the dollar as its official currency and gave up the sucre in a desperate move to halt inflation and help a distressed financial system. But dollarization, a substitute for deeper economic reforms, has been a mixed blessing and has had limited results. The measure brought temporary macroeconomic stability but did not ease other social and economic problems. Higher oil prices that have pushed up revenues and an increase in remittances from Ecuadoreans who have migrated abroad have helped Ecuador’s economy, but also leave deeper problems unsolved. Many Ecuadoreans still resent dollarization because it has tarnished sovereignty, as monetary policy is no longer determined by Ecuador’s Central Bank but by the Federal Reserve System.

Introduction Dollarization is the adoption of the U.S. dollar as currency, replacing the domestic currency as legal tender. This paper focuses on dollarization in Ecuador and examines the causes and the consequences of the move. Dollarization has been a tool tried in a number of countries, often in response to economic crisis. Analyzing the process in Ecuador makes possible a better understanding of what prompts such a drastic policy decision and what results—intended and unintended—it can have.

* Department of Economics, Clarion University of Pennsylvania, Clarion, PA 16214. E-mail: [email protected]

Perspectives on Global Development and Technology, Volume 5, issue 1-2 © 2006 Koninklijke Brill NV, Leiden

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While many countries in the developing world have used the U.S. dollar as a parallel currency, Ecuador adopted a full dollarization in 2000. Dollarization has also been adopted in Panama, El Salvador, and Liberia, and countries like Argentina and Mexico have seriously considered doing the same. Dollarization means the end of the local currency, and it means the country surrenders control of its money supply. It can no longer print its own currency and no longer has control of its domestic monetary policy. The country’s only remaining macroeconomic tool is fiscal policy. What the country gains is access to a stable currency and the elimination of a black market competing with its legal markets. The study examines the crisis that led to dollarization and the economic as well as the political motivations for implementing it. Ecuador’s economic structure became vulnerable to its oil dependence and the country faced a growing external debt burden, inefficient public management, inadequate taxation, inadequate bank supervision, and pervasive corruption. To try to address the crisis, it implemented dollarization. The study also provides an overview of what has occurred in Ecuador during the five years since implementation. The research questions being posed are as follows: What has been the main impetus to dollarize and what does that imply for the country’s economy and development efforts? What were the economic and political motives that led to full dollarization? Why did the government choose dollarization rather than a fixed peg exhange rate? Has dollarization solved the problems it was expected to solve? How has dollarization, which required Ecuador to realign its monetary policy with that of the Federal Reserve System, affected the country’s economic sovereignty? Will dollarization help in solving Ecuador’s economic and financial woes? Background Ecuador is a small country that relies mainly on the export of oil, bananas, and shrimp. It has a population of 13 million people, a GNI per capita of US$ 1,490, and exports a total of US$ 6,038 million per annum (World Bank 2004). Ecuador has a parliamentary democracy. However, its democracy is a shallow one. Having experienced eight governments in ten years is a record hard to achieve even by Latin American standards. The discovery of oil and gas in the late 1960s generated a period of relative boom for Ecuador. As world oil prices rose rapidly in the 1970s, output of petroleum and natural gas increased. However, despite large revenues from oil, Ecuadorian governments incurred large fiscal deficits.

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These were covered by rapidly increasing external borrowing. As a result, the external debt increased ninefold between 1975 and 1980, grew another 74% between 1980 and 1985, and still another 25% between 1985 and 1988 (World Bank 2004). At the end of 1998, Ecuador’s outstanding external debt was at $13 billion, two thirds of its GDP that year—the heaviest burden of Latin America’s economies (Beckerman 2002). The 1980s were a decade of severe external shocks and slow growth. In 1982, the terms of trade declined sharply, as petroleum receipts stagnated. The collapse of oil prices in 1986 precipitated an extended period of fiscal crisis and macroeconomic instability that peaked in 1988. In 1987, the country had stopped servicing its foreign debt with commercial banks as interest rates had risen. Inflation reached 75% in 1989 (World Bank 2004). Throughout the 1990s, Ecuador faced a series of political upheavals. The presidency confronted the political fragmentation within congress but also challenges from labor strikes and street protests that were crippling the economy. Between 1990 and 2000, Ecuador had six presidents. There were also economic shocks that affected the economy. In 1995, Ecuador was engaged in a border war with Peru; in 1997, the El Niño phenomenon struck agriculture affecting exports; then came the Asian and Russian financial crisis; and in 1998, there was a decline in oil revenues due to lower prices. Beckerman (2002) notes that “the public deficit surged as a consequence of these shocks.” Various analysts concur that it was a combination of political instability and exogenous factors that slowed down economic activity (Beckerman 2002; Castro Escudero 2000; Hey 2004). During 1998, the private financial sector became more vulnerable. As economic performance got worse, there was enormous pressure on banks due to the high interest rates and chronic exchange rate instability. Since banking supervision was inadequate, some of the major banks became insolvent. But the government had announced that it was determined to save the troubled banks. A severe monetary imbalance emerged as the number of uncollectables rose sharply. The Central Bank was pouring out large sums of money to keep the banks afloat. Moreover, in its efforts to maintain the value of the sucre, the national currency, by selling dollars, the Central Bank saw its international reserves shrink further. Meanwhile, exchange-rate depreciation led to further inflation. By the end of 1998, the sucre had depreciated by 30%. As a result, there was a growing quantity of dollars circulating as the sucre continued to lose its value relative to the dollar (see Figure 1). The level of uncertainty was at an all-time high.

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Figure 1

Sucres (thousands)

Nominal Exchange Rate (Sucres per Dollar) 30000 25000 20000 15000 10000 5000 0 1980 1990 1992 1993 1995 1996 1997 1998 1999 2000 2001 Year Sucres (thousands) Source: Statistical Abstract of Latin America, based on data from IMF (2001)

By 1999, the economy had been severely weakened. The sucre had lost another 67% of its value. As a way to prevent a further devaluation of the sucre, the Central Bank increased the interest rate. This made debts even more unpayable. Between 1998 and 2000, Ecuador was facing the highest inflation rate in Latin America. Consumer prices reached 60.7% in 1999 and 96.6% in 2000, respectively (see Figure 2). The GDP shrank from $20 billion to $14 billion in 1999. The economy had been severely weakening and per capita growth that year was –7.3% (IDB 2002) (see Figure 3). The depreciation of the sucre was further complicated by constraints on external financing. This was in large part due to the country’s inability to meet its financial obligations, resulting in a default on its foreign debt. Internally, the government also decided to freeze savings and checking deposits, a decision that damaged depositor confidence. The situation was such that the monetary authority had lost control of the money supply, the exchange rate, and the price level. Faced with severe inflation and a floundering economy, Ecuador was struggling with one of the worst recessions in its history (ECLAC 2002). One World Bank study noted that poverty and inequality had worsened and estimated that “between 1998 and 2000 about 200,000 Ecuadorians left the country in search of better economic prospects” (Parandekar 2003: 133).

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Figure 2

Annual Consumer Prices

Consumer Prices 120 96.6

100 80

60.7

60 40 20

43.4 22.8

25.6

30.6

1995

1996

1997

22.4

0 1998

1999

2000

2001

Year Consumer prices

Source: Inter-American Development Bank based on data from ECLAC (2001)

Figure 3

Gross Domestic Product 6 4 2 0 Annual Growth Rate -2 -4 -6 -8

1994 1995 1996 1997 1998 1999 2000 2001 Year Gross Domestic Product

Source: Inter-American Development Bank based on data from ECLAC (2001)

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The Turning Point Between late 1999 and early 2000, the exchange rate, sucres-dollars, increased from 16,000 sucres to 20,000 sucres in just a few weeks, and then from 20,000 sucres to 26,000 in a few days (see Figure 1). Debt to GDP ratio climbed to 98.3%, the heaviest burden among Latin America’s largest economies at that time (World Bank 2002). Inflation, which had topped 96%, threatened to spiral out of control. The 1999 crisis was the turning point as it became the most severe economic downturn experienced by Ecuador. With few alternatives available to tackle Ecuador’s economic problems, President Jamil Mahuad decided to replace the sucre with the U.S. dollar. The announcement to formally adopt the U.S. dollar was made on January 9, 2000. The announcement caused violent demonstrations. By January 21, under popular protests, President Mahuad was overthrown by the military. Even The Economist in 2000 had branded Ecuador as “Latin America’s most unstable country.” Different economic ministers had applied different policies and austerity measures, but the country seemed on the brink of disaster. Ecuador’s fragile democracy was suffering a breakdown and was hampered by small fractious parties that had difficulty building coalitions. Moreover, Ecuador’s tenuous democratic institutions and the management of the economy were plagued by bureaucratic ineptitude (Hey 2004). The proposal to dollarize was ratified by President Gustavo Novoa despite mounting unrest by the indigenous population and organized labor. The policy had little public support because most people regarded it as a national humiliation. However, there was the expectation that this would bring about the needed stability. Ecuador was faced with high levels of inflation, high interest rates, and was unable to attract foreign investment. Dollarization was a last-ditch effort to avoid economic meltdown. It had been presented as a way to start over. However, the initial proposal had not been clearly explained or well designed. The change in the exchange rate regime in its initial stages showed signs of improvisation because it was a move of desperation (Acosta and Juncosa 2000). But above all, it was intended to establish immediate credibility and there were expectations that it would result in greater access to international capital ( Jameson 2003). When Do Countries Dollarize? Evidence indicates that countries that have a history of high and variable inflation are those that are more likely to change their currency (Salvatore 2003). This is also true in countries whose economies have a

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history of monetary exchange rate policy problems. A country might also dollarize if it has a very small economy that trades and borrows internationally but not in its own currency. In addition, a country might dollarize if the central bank cannot be trusted to run its own currency in a stable way, perhaps because there is corruption or because social demands are too high to resist pressures for money-financed budget deficits (Sachs and Larrain 1999). This profile seems to fit Ecuador. Proponents of dollarization argued that a dollarized system would reduce cost and risk, and increase financial stability (Rojas-Suarez 2003). On the other hand, informal or “de facto” dollarization in Ecuador was already prevalent. A similar pattern was experienced in a number of Latin American countries, which rendered monetary policy relatively impotent. In response to a rapidly depreciating exchange rate and high inflation, the value of dollar-dominated bank deposits was often higher than those in local currency. Housmann (1999) argues that de facto dollarization has typically been a response to actual or expected financial turmoil. The financial crisis in Ecuador was in part due to the lack of confidence in the sucre, the banking system, and the monetary authority. The freezing of deposits had led to further erosion of confidence. Alesina and Barro (2001) also argue that the history of inflation in Central and South America should make these countries interested in dollarization. They note that the US dollar is the best anchor currency and stress that dollarization provides a much better alternative to forms of fixed exchange rates because of efficiency gains. Sachs and Larrain (1999) and Rojas-Suarez (2003), however, maintain that dollarization is an extreme solution to market instability and should only be applied in extreme cases. Although the issue has been considered in countries like Mexico and Argentina, it did not materialize because in a country such as Mexico nationalist pride is an impediment that would be hard to overcome even in the midst of a severe banking crisis. In Argentina’s case, a currency board (CB) was put in place in 1991 until 2001. A CB is a half step to dollarization. It is an arrangement to rigidly fix the exchange rate, and the central bank loses its ability to conduct independent monetary policy. The CB, however, collapsed in 2001 as the peso became overvalued and the budget deficit got out of control. In 2002, Argentina defaulted on its foreign debt and was forced to devalue the peso. Argentina was reluctant to adopt full dollarization because it would be too costly a measure. Argentina’s experience with keeping a restrictive exchange rate system for a decade resulted in a dramatic economic slowdown. The dollarization proposal focused narrowly and specifically on the exchange rate regime and did not address other

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issues such as international capital markets. According to Rojas-Suarez (2003), even if Argentina had decided to fully dollarize, it would not have been able to substantially reduce its capacity to service its debt. Is Dollarization Advantageous? Some of the potential benefits of dollarization, as noted by various authors, are to control inflation, to lower the interest rates, to restore confidence, and to put an end to rapid depreciation of the currency (Berg and Borensztein 2003; Chang 2000; Sachs and Larrain 1999). Because of the inability of the monetary authority to control inflation, dollarization was promoted as the only option for Ecuador’s economic ills. The move to dollarize was intended to enhance the credibility of government policy. Dollarization was expected to bring the inflation rate under control since there would be no longer a monetary authority to influence the money supply. As expected, the rate of inflation dropped from 91% in 2000 to 6.1% in 2003 (World Bank 2004). Another advantage of dollarization is the elimination of a sharp nominal depreciation of the country’s exchange rate and the outflow of capital motivated by the fear of devaluation. The elimination of the currency risk crisis should lead to lower interest rates. This would encourage borrowing and, therefore, lead to higher levels of investment that can in turn generate more economic growth. Dollarization is also believed to be advantageous for pursuing commercial integration because it creates stabilization. Along these lines, the intention is also to try to build a stronger domestic financial system and to participate in the international financial markets. One other argument put forth is that dollarization will reduce costs of trade because the sharing of a common currency increases the volume of trade dramatically and commercial integration with the rest of the world is easier (Harper et al. 2002). In terms of the potential costs, the arguments are as follows. For many Ecuadoreans, embracing dollarization has meant giving up independent monetary policy. The biggest drawback has been relinquishing financial sovereignty, since monetary policy is now in the hands of the Federal Reserve System (Fed). The Central Bank of Ecuador, whose role is now very limited, cannot print its own money. However, others would argue that active monetary policy before had proven ineffective. But one question many people were posing was: How will Ecuador’s economy cope as the Federal Reserve increases interest rates? That would discourage borrowing and, therefore, investment. Another issue Ecuador is now forced to deal with is the rapid weakening of the U.S. dollar relative to

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other major currencies. While it might help boost the country’s few exports, the main disadvantage is more expensive imported inputs the country needs. Furthermore, dollarization on its own was not intended to strengthen the financial system. While dollarization did limit state intervention in the economy and it has resulted in austerity in fiscal spending, government funds have continued to be channeled through the banking system. Also inflation and interest rates have decreased, but they are still above the international average level (ECLAC 2004). Large banks such as Filanbanco and Banco del Pacifico have experienced difficulties. One measure taken in 2001 to complement the dollarization program was passage of the Economic Transformation Act, a measure aimed at restructuring debt and the reorganization of the Superintendency of Banks. Another concern with dollarization is the loss of seignorage revenue for the government and the Central Bank’s role as lender of last resort. In the case of Ecuador, there have also been problems related to shortage of small coins to give change in making basic daily transactions. This put upward pressure on prices as merchants were rounding up to the next dollar. Another problem has been counterfeiting, particularly coming from neighboring Colombia. Lessons from Ecuador’s Experience Driven by the liberalization of markets, Ecuador operated under a flexible exchange rate. But between 1997 and 2000, the economy deteriorated and the national currency faced turmoil. Aggravating the problem was an inadequately supervised and regulated banking system. The authorities were forced to bail out large banks to prevent a chain effect of default. The country was also vulnerable to external shocks due to its dependence on oil revenues. Although it had a small and relatively thin financial market, when the economy contracted it was unable to avoid substantial volatility and serious misalignment. To make matters worse, the government suffered from a credible policy to control inflation. Since dollarization, the economy has recovered and macroeconomic balances, including fiscal health, were in large measure restored. However, the recovery benefited from greater revenue streams from higher oil and natural gas prices, low international interest rates, and larger remittances. A rebound in the financial system has helped GDP growth, which during 2000-03 averaged 3.5%, and the inflation rate declined even if it has remained above world inflation. But as Jameson (2003) puts it, dollarization has not fully addressed the central economic issues of Ecuador because some old problems persist.

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The economic crisis leading up to full dollarization had a social cost. According to World Bank studies, poverty and inequality intensified (Parandekar et al. 2003). Although macroeconomic performance improved in 2001-03, it has not been a sustainable recovery. The World Bank, the Inter-American Development Bank, and the IMF were cautiously optimistic and marginally supportive of the move. Political instability also is still a concern in Ecuador because the public has very low estimation of the established political parties. Between 2000 and 2003, the country had six finance ministers who lasted only seven months in office. Despite some positive developments, Ecuador has not yet taken a path leading to long-term sustained economic growth. While dollarization might have helped to improve monetary stability, the current economic and political situation remains fragile. The latest victim was President Lucio Gutierrez, who was ousted from office in April 2005 after a short period as president. The ousting of Gutierrez marked the third time since 1996 that an elected leader in Ecuador had been removed from office amid a popular uprising. From the start, the new president Alfredo Palacio has struggled to satisfy the demands of domestic groups for increased social spending and IMF requirements for fiscal austerity. The interim president lacks a solid political base and has experienced hostile relations with the legislature. He has also faced rapid turnover in his cabinet and has suffered a decline in popular support (Political Risk Services 2005). In the Andean region, Ecuador remains one of the most turbulent and unsettled countries. Many in Ecuador strongly disagreed with the decision to dollarize five years ago and this is an indication that the dollarization of the economy is not on a firm foundation. Also, many Ecuadorians still resent dollarization because it brings Ecuador’s economy closer to the American economy, even if the two are quite different. Critics have emphasized that U.S. monetary policy strongly influences Ecuadorean interest rates, her export competitiveness, and the cost of imports-all real economic effects. More symbolically, but powerful, is that every transaction takes place using a currency with foreign historical figures stamped on bills and coins. Every monetary transaction becomes a daily reminder that Ecuador lost control of its economy and ceded key components of economic independence to the United States. While one could argue that Ecuador never was independent of the economic trends of her largest trading partner, dollarization symbolically aligns Ecuador’s economy even closer to the American economy. Dollarization did stop hyperinflation, although some Latin American countries have tamed inflation without abandoning their own currency. As economic growth resumed, inflation slowly came down to single-digit

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levels. However, while inflationary expectations were reduced, the measure has not fully stabilized price increases. Dollarization also caused realignment between tradables and non-tradables. Prior to dollarization, exchange-rate devaluations were one of the major factors underlying the rapid price increases. One achievement of dollarization has been restoring credibility and confidence in the banking system. The financial system has gradually recovered and there has been a reactivation of domestic demand. The increase in demand has been due to the sharp decrease in inflation. Two favorable factors have been more revenues from higher oil prices and growing remittances from Ecuadorians working abroad (Fretes et al. 2003). The former has been important in helping Ecuador’s recovery. The issue of remittances also has important implications as the impact of dollarization resulted in higher levels of unemployment. This in turn led to a higher exodus of Ecuadorians, particularly to Spain and the United States (Rotella 2000). According to recent studies by the World Bank and the Inter-American Development Bank, earnings from immigrants are now the number two source of foreign exchange in the Ecuadorian economy (Wilson 2005; Schiff and Ozden 2005). Another positive note is that not only have bank deposits increased but also interest rates have remained low. One outcome of the banking crisis has been a substantial reduction of financial institutions now in operation. But modest improvements due to dollarization disguise growing internal and external imbalances. For instance, there has been only partial convergence to international inflation rates, the fiscal and trade deficit remains high, and other measures to strengthen the financial system remain incomplete. Moreover, there have not been structural reforms to strengthen the financial system. The move to dollarize also reenergized debt renegotiations, as Ecuador still suffers from heavy debt obligations. Although there was an attempt to promote new foreign investment projects, the government is reviewing the state’s contracts with foreign firms. Under the current terms, the government is entitled to only 20% share of profits. Yet the underlying political problems remain: a record of political instability, growing financial strains and pressure from domestic groups to increase social spending, and a highly fragmented political system. Moreover, dollarization has not stemmed the tide of Ecuadoreans leaving their country to seek better fortunes elsewhere. This has become a drain in human capital, as about one of every ten Ecuadorean has left.

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Concluding Remarks Dollarization has stabilized some areas of the Ecuadorean macroeconomy, but has not solved the underlying problems that would contribute to sustained development. Furthermore, dollarization has not fully addressed undisciplined budgetary tendencies, poor bank supervision, and labor market rigidities. In short, dollarization has not been the solution to institutional flaws that led to the crisis in the first place. Dollarization has put Ecuador on a course counter to that being taken by much of South America, where many countries have elected leftleaning leaders. Dollarization ties Ecuador firmly to the United States at a time when its neighbors are ramping up rhetoric and actions in defiance of the United States. For example, Venezuela’s Chavez and Bolivia’s Morales are shifting their oil and gas markets away from the United States to China and other customers. It seems likely that Ecuador’s leaders will face pressure from both U.S. officials, who want to keep countries within their realm of influence, and from countries in South America urging a more independent course. In addition, there are deep social and political divisions within Ecuador, which have been exacerbated by the pursuit of neo-liberal economic reforms required to support dollarization. The new administration is likely to face growing dissatisfaction at home as well. After only five years, it might be premature to say what the full impact will be over the long run. An issue that remains under consideration is at what point does dollarization becomes too costly to be reversed ( Jameson 2004). Although the process might seem irreversible because it involves high transaction costs, the new administration has given signs that it is not entirely happy with the measure. Even the new Finance Minister was an outspoken critic of the decision to dollarize and stressed that the issue was being reconsidered (Forero 2005). The government faces much criticism because it raises questions about economic policy independence. Although Ecuador has shown signs of improvement, analysts differ on how much this is attributed to dollarization. In part, this is due to favorable external conditions, particularly higher oil prices. However, there are other indicators that are of major concern. Unemployment was above 12% in mid-2004, inflation was above international rates, and the fiscal and trade deficits were still in the red. If Ecuador resorted to dollarization as a way to cope with widespread political and economic crises, the evidence suggests that it has only delivered partial results because it has addressed some of the symptoms but ignored the deep-rooted causes of those crises.

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Acknowledgment The author is grateful to Samantha Roberts for her comments on an earlier draft and to Maria Alexandra Gonzalez for helping to compile information for the text and graphs. References A costa, Aberto and J ose Juncosa, ed. 2000 Dolarizacion: informe urgente, Quito: ILDIS-Abya-yala. A lesina, A. and Robert B arro 2001 “Dollarization.” The American Economic Review, 91 (2) May. B eckerman, P aul 2002 “Long-term Origins of Ecuador’s ‘Predollarization’ Crisis,” in Paul Beckerman and Andres Solimano (ed.). Crisis and Dollarization in Ecuador, Washington, DC: The World Bank. Berg, A. A ndrew and Eduardo Borensztein 2003 “The Pros and Cons of Dollarization,” in Dominick Salvatore, James Dean, Thomas Willet (eds). The Dollarization Debate, New York: Oxford University Press. C astro E squdero, Alfredo 2000 “Ecuador: la crisis que no cesa,” Comercio Exterior (Mexico), 50 (5) mayo. C hang, Roberto 2000 “Dollarization: A Scorecard,” Federal Reserve Bank of Atlanta, third quarter. D el N egro, Maren, Lisandro Hernandez-Delgado, Owen Humpage, E lizabeth H uybens 2001 “Introduction,” Special issue on global monetary integration. Journal of Money, Credit and Banking, 33, (2) May. ECLAC 2002 Economic Survey of Latin America and the Caribbean, 2001-2002, Santiago, Chile, Economic Commission for Latin America and the Caribbean. 2004 Statistical Yearbook for Latin America and the Caribbean, Santiago, Chile: United Nations Economic Commission for Latin America and the Caribbean. F orero, Juan 2005 “Ecuador’s New Chief Picks Cabinet; Leftist in Economic Post,” The New York Times, 22 April, A6. F retes- Cibils, M arcelo G igugale, Jose R. Lopez-Calix 2003 Ecuador: An Economic and Social Agenda in the New Millennium, Washington, DC: The World Bank. H arper, B etty S. P hil H arper, C arlos Coronel 2002 “Dollarization: Making International Trade Seamless, The CPA Journal, 72, January. H ausmann, R. et al. 1999 “Financial Turmoil and the Choice of Exchange Rate Regime,” Washington, DC: Inter-American Development Bank. H ey, A.K. Jeanne 2004 “Ecuador: Foreign Policy on the Brink,” in Frank O. Mora and Jeanne A. K. Hey (ed.) Latin American and Caribbean Foreign Policy, Lanham, MD: Rowan & Littlefield. IDB 2002 Social and Economic Progress in Latin America, 2002, Washington, DC: InterAmerican Development Bank. Jameson, Kenneth P . 2003 “Dollarization in Latin America: Wave of the Future or Flight of the Past? Journal of Economic Issues, 37, 27, September. “Is it Possible to De-Dollarize?” International Journal of Political Economy, 33, 1, Spring.

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P alan, Zonia 2000 “La dolarizacion en el Ecuador,” in Alberto Costa and Jose Juncosa (eds). Dolarizacion: informe urgente, Quito: ILDIS-Abya-yala. Parandekar, S uhas, Rob Vos, Donald W inkler 2003 “Ecuador: Crisis, Poverty and Social Protection,” in Paul Beckerman and Andres Solimano (ed.) Crisis and Dollarization in Ecuador, Washington, DC: The World Bank. P olitical R isk S ervices 2005 “Ecuador: Country Forecast,” South America, Volume 3, 1 November. Rojas-Suarez, Liliana 2003 “What Exchange Rate Arrangement Works Best for Latin America?” in D. Salvatore et al. The Dollarization Debate, New York: Oxford University Press. R otella, S ebastian 2000 “As Crises Converge on Ecuador, an Exodus,” Los Angeles Times, 13 July 2000. Sachs, Jeffrey & Larrain, Fernando 1999 “Why Dollarization is more Straitjacket than Salvation.” Foreign Policy, Fall. S alvatore, Dominick 2003 “Which Countries in the Americas should Dollarize?” in Salvatore, Dominick, James Dean and James Willett (eds), The Dollarization Debate, New York, Oxford University Press. Schiff, Maurice and C aglar O zden (ed.) 2005 International Migration, Remittances, and the Brain Drain, NY: Palgrave Macmillan/World Bank. Wilson, S teven 2005 Beyond Small Change: Making Migrant Reittances Count, Washington, DC: InterAmerican Development Bank. World B ank 2004 “Ecuador Poverty Assessment.” Report 27061-EC. Washington, D.C.: The World Bank, April. 2002 “Fiscal Policy in a Dollarized Economy.” (http://www..worldbank.org/ LAC/LACI).