INGLES: Dollarization: A country shielded by Joyce de Ginatta

Dollarization: A country shielded by Joyce Higgins de Ginatta

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Traducci贸n al Ingl茅s: Octubre de 2010

Dollarization: A country shielded by Joyce Higgins de Ginatta

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Introduction

Rich, green, amazing, fruitful, productive, and diverse. This is how Latin America can be described. Each of these adjectives describes the land, soil, and natural resources.

Most Latin American countries have generous and fertile soil; the mineral resources and biodiversity are privileged, but at the start of the third millennium, the majority of their inhabitants live on the edge of extreme poverty or poverty. A group of human beings is starving beside the source of food, dying of thirst beside the fountain of water, and dying of needs beside a productive treasure.

People have rights and duties. Our people have the right to live free from poverty, free from tyrants and with innumerable opportunities. They also have the duty to fight for their own welfare, the duty to be informed and not to be deceived and seduced by populist movements and utopias. They have the responsibility to take thought out risks designed to clear and create paths, as has been the case with the innovative reality of Dollarization on Ecuadorian political front.

In our diverse geography, there are people who are deserving of a better life, the kind that we ourselves must build side by side. Development must not be left to chance or improvisation: it must be planned and the rulers must set out the general direction, deregulate, eliminate restrictions and release the creative forces and productive energies of the private sector to make this, and not the state, the main engine of development and progress.

There is light at the end of the tunnel. Ecuador deserves a better life, which is the reason for my insistence on establishing and maintaining Dollarization. This scheme requires fair play and survival through rational and sustainable use of our wealth, creating jobs and forming a powerful middle class that represents the majority of the population.

Latin America would change significantly for the better if this scheme were implemented throughout the region. However, together with Dollarization, we must implement the correct rules of the game from the first world in order to repeat the phenomenon of Singapore and so, being truly competitive, sell the world efficiency, added value, innovation and not misery.

However, we must not stop there: to achieve the overall well-being that is so elusive in our land, we must innovate, create, invent new possibilities and look where no one has looked before, as I invite you to do with the new approach to supply and demand that I explain in this book.

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With honorable exceptions, as in the case of Chile and probably El Salvador, with its enlightening emergence, the problems of our countries have been created and have continued, many of them as the result of economic and political mismanagement. For many decades, those who have sustained power, instead of doing what should be done, have done what little they have been allowed to do or what they have wanted to do for their own dark purposes, usually guided by those who financed their campaigns.

In most cases, financiers and supporters of these politicians are part of a ring of relations defending the privilege of living in closed societies. Here they control the levers of power at the expense of perpetuating the oppressive cycle of Latin American poverty in these countries, such as Ecuador and Argentina, which have seen their hopes of progress collapse after "bank holidays" and the freezing of deposits in private banks. What further abuse of the defenseless civil society than to strip people of their savings (savings that for many were from their whole lives)?

That is a grotesque way to pass the bill for the corruption and waste on to those who were merely innocent spectators of the tragedy and abuse in the political and economic leadership of their country.

This book is the credible testimony of a woman who has faced all the forces that prevented development of the country in different ways, such as communism entrenched in certain social movements today; unhealthy centralization; corruption, generated mostly by monopolies and oligopolies of public and private business; and the "discretionary power‖ which is so conveniently and absurdly abused.

In Ecuador, as well as in other countries of the Americas, they have put the brakes on any good intentions to modernize the state, disguising their speeches with false promises of welfare and patriotic messages that exploit the real feelings of anguish and despair of millions of people mired in poverty and ignorance. As an example, public and private monopolies have impeded the efficiency of basic services such as telephony, electricity, clean water, education, health, roads, social security and others, to the detriment of the thirteen million Ecuadorians who make up the nation and of many other millions of Latin Americans.

In Ecuador, blindness and arrogance of power have clouded the rulers‘ vision, leading to the financial and economic tragedy of 1999, which caused us to become, among other things, the leading exporter of cheap labor and undocumented immigrants in Latin America.

Fortunately, after January 2000, the Dollarization of Ecuador's economy, paved the way for hope, although only after a long and unnecessary period of adjustment, for reasons that are discussed in this book. The country began to change from a casino country to a productive country. It began long term planning and acting in order to revive its economy and, little by little, it began to come out of the infamous hole where it had been placed by the grave digging politicians of the country who

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were accustomed to work only for themselves, for the privileged and for an elite minority.

For young people, for their present and future, I had to face the opposition of political, economic and social powers of the nation. I believe in young people and I think, I know, that it is our duty to change Ecuador, so that they can develop their skills.

With the valuable help of the media in Ecuador, which have noticed the events that occurred during the past ten to fifteen years, I have been able to gather information on what has happened and assemble this mosaic of realities and ideas, so that every inhabitant of Latin America can choose between the long-awaited change that our republics demand, or remaining definitely stuck in misery. Through my research and experience, I have perceived that the country which has been seen as an idealized model for our free economy and is our main economic partner, the United States, also has shortcomings and accepts fallacies and makes mistakes in its policy towards Latin America, which turn against it and us. I have found that some multilateral agencies, whose aim is to promote the socioeconomic development of Latin America and the world, do not meet their goals efficiently due to a distortion in their perception of reality, their measurements and their tools.

This is a book of testimonies. This is the saga of Dollarization. It is the living memory so that we will never forget what we suffered as a result of corruption and ineptitude and how after so many public-private struggles, personal and popular struggles, our second independence from the yoke of enslavement of impostors arrived through Dollarization in January 2000. This is an independence that we are still building and strengthening as a country.

This book is so that reflexively, we will never let the impostors, neither the same old ones, nor new ones, take away the parameters of stability and confidence that Dollarization has brought us. Only through this strong attractive currency, together with other measures and freedoms that are described here, can we be a people free to walk, progress and bring forth personal and collective wellbeing.

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Chapter I § A personal testimony I had always valued my anonymity; it was my greatest treasure. I started from scratch as an entrepreneur, I spent some years in silence because of the illness and later separation from my husband, so I maintained my low profile until 1991. I didn‘t let people take pictures of me. I didn‘t accept proposals to lead the Chamber of Commerce, and especially not ministries or public offices. I also changed the name of my company so that it had nothing to do with my surname.

However, things changed in 1991. In January of that year, a group of people from the Chamber of Small Industries asked me to participate in union elections. My first response was negative.

At that time, I was preparing a trip to the United States. While I was there, the news about the situation in the country was depressing: acts of corruption were beginning to occur and I was informed of absurd events that were occurring in government management, but I realized that no one, especially for the Chambers, was saying anything. Meanwhile, people insisted on asking me to accept the proposal. What were the options? If I participated and didn‘t win, I would have the right to complain because I had tried. If I participated and won, I would frequently be in the media, which was not the case at that point, and I would try to push this country down the path in which I believed.

Finally I decided to participate in the election and I won with more than 40 percent of the votes. I was the first woman to head a Chamber, in this case, the Chamber of Small Industries of Guayas. My public life began.

The first interview I gave to the media was a litmus test: I decided to be precise and firmly point out the main problems of the country. I gave the names of those I believed to be responsible for the national situation. I even said that the condor on the country‘s shield should be changed to a crab because we were going farther backwards every day. I had only one intention: to transform the Ecuadorian‘s philosophy, so that this country would be for everyone and not only for a few.

I could not imagine the political and media power that the presidency of the chamber would have. On the contrary, when it was proposed to me, they said it was a two-hour a week job. Not so. The Chamber was poor, had very few people, no image and only a very small staff.

However, one characteristic of my personality is stubbornness or perseverance, it depends on the angle you choose to look at it from. So I brought that institution forward.

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My father had been raised me for competition, human values and freedom. That was the only fortune he left me and it was instrumental in my life. I'm a fighter and I am clear about the principles that I fight for. § The political crisis For me, power does not mean influence peddling. Ethically, if one is set to defend something from one side of the table, he or she cannot also be on the other side looking for personal gain. It is one of my obsessions and it is my way of doing things in life.

In November 1995, during the electoral campaign that brought Abdala Bucaram to the Presidency of the Republic, I invited all of the candidates to a forum in the Chamber. The idea was to deliver a "pre-project" of the country so that they give their views. The future president attended the forum, received the document, allowed no questions and left. My reading of that was easy: Bucaram knew nothing about economics.

The year 1996 arrived. Bucaram won and the first thing that struck me about him was that one month after becoming President, he dominated economic concepts, especially the common sense of the economy. Former Argentine economy minister, Domingo Cavallo, had done a good job as adviser to Bucaram.

Then Bucaram did something that impressed me: he proposed convertibility, which meant a straitjacket for the government. It was a valuable idea because it sought to overcome the crisis in which we were plunged. Nevertheless, I didn‘t like that system because in a country like ours, where everything is violated and changed from one day to the next, it would be dangerous for sucres to remain in circulation.

There was the danger that convertibiity, being a reversible mechanism, would create uncertainty and doubt.

At the same time, the government was drowning in the political sense. One of the main reasons was that the president was perceived to be working for his friends.

As President, he had intervened in favor of a private enterprise that exported bananas and at that moment, I felt that the people had said, ―No, this cannot be.

This is a dictatorship. It was obvious that he was going to fall.‖ With this information, I requested an appointment at the American Embassy. Why did I go to the Embassy? For two reasons. First, because the U.S. government was working with us on a project to improve the situation of small businesses in Ecuador. Second, because Bucaram had a good relationship with American diplomats and I thought they could persuade him to withdraw a group of people in the government who were hurting him, personally and in his government work.

Bucaram fell in February and decided to send a letter to former presidents asking them to analyze the macroeconomic plan that had been developed a year earlier, after the resignation of Vice President Alberto Dahik.

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It was a plan to bring the country forward, to design 21st century Ecuador, but there was no favorable response. Only one former president replied. § From reflection to the proposal While all of these events were occurring, I reflected on what had been done that could improve the economic status of my family.

I remembered many years ago when I had gone to Citibank, a serious and professional institution, and convinced its managers to grant me a loan to move forward with a company that was bankrupt.

The second point was that I had 90 percent of the decision regarding the future of my company and my family in my hands. The remaining 10 percent was government decisions and natural disasters that could occur.

The third point was that a loan in sucres could be projected long term because it was (at that time) a hard, stable currency that would not bring me surprises.

While reflecting, I realized that during the nineties in Ecuador, things had changed, upsetting the stability and good health that our economy had had for a long time.

Ninety percent of the decision was in the hands of those who controlled the government: they made shady deals with the currency to their liking, devalued it when they felt like it, and weakened the small and medium businesses. There was a huge uncertainty about credit, terms, investment and business projection. Only 10 percent of the decision relied on my expertise and knowledge of my business.

I began to shape an idea and I started to think that the solution was Dollarization of the Ecuadorian economy. I was earning in dollars and I benefited from the fact that the sucre circulated in Ecuador, so a radical change of the monetary system could eventually harm me. The idea was not to safeguard my benefits, but to seek a solution to the country‘s problems.

In late 1997, I was convinced that Dollarization was the alternative. I had analyzed all of the angles and possibilities. My micro business world was a sign that the system was positive. I had started with something small and then it had grown reliably and safely. My company has grown without ever having paid a bribe; it had competed cleanly, without asking for favors or acquiring political commitments.

Nevertheless, I decided not to disseminate the idea because we were involved in an election campaign and the candidates, especially the future president, Jamil Mahuad, claimed that he had the formula to solve the crisis.

Mahuad won and reality showed us the same as always: the economy, fine, thanks. Discretionary power in currency handling continued, there were no plans to create jobs, and the crisis deepened.

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I waited for a month and in September 1998, at a press conference, I stated that the only way left to solve the country‘s economic problems was to eliminate the sucre, which had been murdered by the politicians, and go to the dollar standard system.

The reactions were terrible and people called me everything, including that "it had to be a woman" to propose such a thing. Others protested that abandoning the sucre was to renounce national sovereignty and some people branded me with terrible epithets.

The strategy was in place and no one was going to stop me. Wherever I went, in public spaces given to me and in interviews with journalists, I spoke about Dollarization. Part of that strategy was to promote events, forums and debates to attract people who were convinced by the proposal and would help me to promote it. § The idea grew On December 21, 1998, I organized the first meeting in the Chamber. It was called 'Convertibility Dollarization or what? It was a non-academic title, but it was very pragmatic: the attendees had to choose between one of the first two alternatives or propose a third one.

Among the presenters was the Cuban-Spanish journalist Carlos Alberto Montaner, who introduced me to an extraordinary character with very liberal ideas, the economist Franklin Lopez Buenaño. Lopez was very intelligent. He was in favor of convertibility, but after a 15-minute conversation I was able to convince him. He was my first "apostle," a tremendous asset to help me spread the word.

A few weeks later, we set up the Economic Forum and became 22 spokespersons for Dollarization. In early 1999, the project had been consolidated.

Meanwhile, the currency devaluation continued and my efforts to convince Mahuad‘s people to dollarize, because the national economy was falling apart, never ceased.

In February, Mahuad invited us to a meeting in Quito to tell us that one of the proposals was to raise the VAT to 18 percent and we told him not even to think about that because it could end badly.

Back in Guayaquil, the Argentine experts from the Mediterranean Foundation, Mondino and Gutierrez, were waiting for us in the Previsora building. It is said that they had been brought in by the former manager of the Previsora, Alvaro Guerrero, who was very close to Mahuad. During the meeting, they recommended convertibility, but I would not give in: in Ecuador it was not possible to implement a model that could be reversed. They said that Dollarization was terrible because

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there was no way to reverse it and I assured them that this was precisely the quality that gave it strength and security.

I had never thought about the possibility of freezing bank deposits. No one knew for sure who had recommended that decision to Mahuad, although very valid evidence leads to Guerrero, who knew that the bank he managed was collapsing and he was very close to Mahuad, The freeze was a blunder. Mahuad should have decided on payment in dollars for customers who wanted to withdraw their money.

It was obvious that for some time our economy had been anchored to the dollar, devaluations imposed the dollar as a reference, and many people speculated with the dollar. The country paid dearly for Mahuad‘s mistake. § Who did Dollarization favor?

I will never forget the day I sent someone to change a $100 bill and he brought me three million sucres. I also remember that the last Sunday lunch I organized for my family of 26 people cost me (at the exchange rate of the time) $10. These are two clear examples of how our currency, the sucre, had lost its value rapidly.

Another case: The middle class was being destroyed, not only by the freezing of deposits, but by the situation of instability and uncertainty. A prestigious physician, with seven children, decided to build his house, with all the necessary sacrifices. He could pay a thousand dollars, which was equivalent to six million sucres. Suddenly, the dollar began to climb, farther and farther upward until the thousand dollars was equal to 25 million sucres. The doctor increased his work hours. He tried by all legal means to increase his income, but his customers could not pay more because they were earning in sucres and he could not raise the cost of a visit. So, his expenses rose and his revenues fell.

It was an perverse system. Some people were able to save their homes because when Dollarization arrived, they were able to negotiate with the bank, at a high cost and a great personal and family effort. Others, however, did not have the same fate.

Therefore, it is wrong to say that Dollarization hurt the poor and benefited the rich.

A young domestic servant earned ten dollars a month and now receives $250 plus all the benefits. He or she can buy a TV, eat a turkey on New Year's, and rent a small house. That was impossible before 1999.

A few months before Dollarization, unemployment in Ecuador was above 20 percent. During the crisis, several retail appliance chains had to close and left hundreds of people out of work. In Ferrisariato, in 1997, a secretary earned the equivalent of $800 in sucres. Suddenly her income began to fall lower and lower and it never rose again. When Dollarization took place, she was earning the equivalent of $120. What does this mean? With a volatile and uncertain system, in

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just two years, the secretary‘s standard of living and access to goods and services was reduced by nearly eight times. That person could only begin to recover when Dollarization stabilized wages.

The losers were those who speculated with the exchange rate and, thanks to this distortion, were able to travel abroad ten times a year.

We must also remember that the business of exporters was not to sell bananas, shrimp and other products, but rather dollars. In reality, the country was not an economy, but a casino.

The problem began when the rest of Vice President Alberto Dahik‘s macroeconomic program was overturned. This caused Dahik to promote a casino system for people to bring dollars and put them in the bank to speculate in sucres.

It was serious because the interest rate rose to one hundred percent. No one dared invest and everything was off balance. Financial speculation would have its macabre end a few years later. § The change brought stability Today, we have a stable currency. Many people have begun to set up small enterprises, businesses of all sizes, buy houses in programs such as the Big Lots project in Guayaquil, etc. There are certainties, there is stability, and there are ways to plan personal and business finances smoothly and with no surprises.

Clearly, if we look at the figures carefully, we can see that Dollarization allowed salaries to recover, improved exports and there was no longer speculation on currency exchange rates. Easy money became productive money.

Exporters now admit that there were many flaws in their work schemes at that time.

They also recognize that the system brings them profits because they can even sell their products in our own country.

But if you want a sign of that stability, it is that while the country reeled with the overthrowing of presidents in politics, nothing happened to the economy. Can anyone imagine how many sucres the dollar would be worth now, with the three crises this country has had? Can anyone imagine what would have happened with the abrupt departure of six finance ministers in the government of Alfredo Palacios?

The economy is shielded from political chaos. The best sign that Dollarization is a guarantee for everyone cannot be seen. There is no longer that distress in the streets when people asked how much the dollar was worth, or what was happening with the dollar, and all of the serious consequences this entailed.

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Big businessmen, who base their strategies and internal systems on the dollar, no longer worry about what might happen if an economic mess were to occur in Ecuador. Since they manage their business in dollars, they simply go to Peru or Colombia and their money continues to yield profits. Of course what would be lost in this case are many jobs for our countrymen. However, that would not be because of Dollarization, but because of political upheaval.

Perhaps one of the few problems we could point out about the system is that many people are doing well and have been able to grow, which has made them hide in their caves and be disinterested in what happens to the country. Now, that is a tragedy.

But the bottom line is that now there are no people dying of hunger while others are living at their expense: bankers can no longer speculate widely and they cannot hide the distortions that arise from their incapacity; businessmen have corrected their mortal and venial sins; domestic products have had to begin competing with quality and efficiency to deal with imported products; small businessmen now have more options and can even establish their restaurant chains outside the country. Production, distribution and marketing networks are multiplying. What more can we ask of an economic system? Of course those who did not do their homework on time, and those who did not fulfill their duty as actors in the economy, were left behind. § Obligation: to be competitive Critics say that Dollarization is a fragile system, sustained only by high oil prices and remittances from Ecuadorians abroad.

But let's be specific: Dollarization brings monetary and exchange stability, and forces us all to be competitive, but it cannot perform miracles, nor can it replace the work that must be done by the government.

How can we consolidate the new system if the government discourages investment, if its ads create uncertainty, if there is no legal certainty, if creating jobs involves a series of bureaucratic obstacles, if investment is not promoted, if we have the most expensive electricity in the region, if we are full of absurd and useless bureaucratic processes such as those required by the Internal Revenue Service?

However, let‘s be positive. When we see that Ecuador is the Colombian or Peruvian dream, because many citizens of these countries want to come here to earn more and send money to their families, something good must be happening in our nation. Our economy is already real, and is not based on emptying people‘s pockets or eliminating inefficiencies and charging it to the public. Our economy is now based on becoming increasingly efficient and on private companies meeting their obligations and being creative. However, the government should endeavor to give us electricity at affordable prices.

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It is a fallacy to say that Dollarization is sustained by external factors. If that is so, why do we praise Chile, which depends, in part, on copper exports? What is true is that we should not accept the existence of monopolies, such as the sugar monopoly. Why don‘t governments let sugar be imported and let that product compete with the Ecuadorian product? The domestic sugar mills would have to fight for their space with the foreign companies that would come to Ecuador. That's part of the challenge that good business and good government face: we must learn to compete fairly; we must learn to value what we do, comparing ourselves to others. We must move beyond dependence and finding the easy way out, such as buying energy from Peru and Colombia instead of seeking ways to produce it ourselves, or boycotting the exploitation of gas in the Gulf of Guayaquil to allow the barges to remain, or postponing enlargement of the Paute dam for twenty years, or expelling the U.S. company Oxi instead of intelligently negotiating royalties, or exporting surplus maize instead of refining it and turning it into ethanol, or creating the Deposit Guarantee Agency (AGD) so that the mice can eat the cheese, or planting coffee in regions where a high quality product is not obtained. All of this happens because we do not make common sense decisions.

These are absurd things that prevent us from growing as a country and they have nothing to do with Dollarization, but rather with the attitude that we have as Ecuadorians, to cut our own wings.

Dollarization as an idea was not a whim, but the result of a profound analysis of the urgency of getting out of an unbearable cyclical crisis. Dollarization has gone beyond where it had to go and, contrary to what some think, it is what has prevented us, as the country, from sinking, despite the serious political problems we have experienced.

The life of a country is built on the basis of competition, the struggle to be better than foreigners, the struggle for quality, efficiency, and substantial improvement that occur every day.

That's why I have written this book. So that Ecuador can be a first world country, that Ecuador can dream of going much higher, so that Ecuador will not belong only to some, but to all. § America and the First World From multilateral institutions, people perceive that prosperity must be punished, we must punish those who create wealth by harnessing them with excessive taxes, red tape, discretionary rules ... And devaluations, far from being considered harmful, are considered attractive and are promoted: That’s absurd!

America, the continent of opportunity When America won its first independence in the nineteenth century, the concept of freedom sought to base itself on the rights of the people and respect for the rulers.

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Independence was the way to make Americans prosperous citizens and for the laws and power to be used to serve the people and not the opposite.

America‘s modern history could be titled: "America, land of opportunities." This continent not only reflects the consequences of the colony, but through the ensuing years, has become an area that receives millions of people from all continents. .

And indeed it is for those who have the will to move forward based on their work and discipline. Many came to escape totalitarian regimes of legal uncertainty, racial or religious persecution. America was seen as a land where equality, democracy and prosperity reigned, a land of natural wealth, geographical diversity, and beautiful landscapes...

What happened to that freedom and prosperity in Latin America? Far from being preserved, they have been lost and now, most Latin Americans have become victims.

Our liberators gave their lives for something different than what we live today, because freedom or independence is only the beginning of democracy and democracy is respect for the citizens. This respect means governing to serve the people, generating prosperity. It is the effective way in which one was born, becomes consolidated, and a group of countries forms a prosperous region.

Sustainable development is that which forms and strengthens a strong middle class and gives people sufficient resources to purchase the goods and services their families need. At the same time, a growing economy is substantially consolidated with values such as ethics, justice and equity, which shape a democratic, egalitarian and inclusive society. With few exceptions, none of these conditions is fulfilled in most of our countries.

The democratic system was distorted, the political class was discredited and the quality of life of Latin Americans became worse. How could the political class go to the extreme of using power to take advantage of the people, how could it go so far as to boast about the Machiavellian concept that "the end justifies the means"?

The answer is simple: the political space was void of those who advocate free markets, transparency, equality and the rules of the first world.

The abandonment of the ring makes those who hold power in developing countries take advantage of people, forming a society based on privileges, gifts and corruption, thus limiting the space for new generations by eliminating any possibility of democratic opportunities.

This political class has been so cruel that the goal of those who came to power in most third world countries in the last decade, was to repay those who financed their campaigns.

Donations and contributions to politicians became investments, particularly for the banking sector. Other financiers, far from wanting rights, demanded privileges and

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generated a society of a few who accumulated wealth which, through lawful means, could not have been achieved.

It is time to change. It is time to resume the path of true independence. To do this we have to analyze the role of the different sectors of society; that of our leading trading partner in the hemisphere whose hard currency we use; and that of the multilateral agencies, their performance and accountability. Only then will the second and definitive independence of Latin America be born and mature in order to rescue the youth, the middle class and the poor. This is about making Latin America a continent of hope. ยง The United States: strengths and weaknesses I am Pan-American and pro-Yankee. However, as we live in a democracy and I am coherent, I have always made the constructive criticism necessary to promote changes and to open the eyes of the decision makers.

The United States is of great importance for its influence on regional trade and its special relationship with Latin America. This great country, sometimes loved, and sometimes hated, is decisive for the rest of the continent because its actions, policies and measures affect us directly.

There are tendencies for and against greater integration with the United States.

Momentarily the Free Trade Area of Americas (FTAA) has been lagging. More than from the frontal opposition of Brazil, the delay is caused by the projects for Free Trade Agreements (FTAs) that the nation in the North has signed, individually or in groups, with Chile and Central America.

In the volatile and demanding world of inter-American negotiations, the talks to achieve the FTA between the U.S. and, individually, Colombia, Peru and Ecuador, have had mixed results. It was signed by Colombia and also by Peru, but Ecuador doubted, hesitated and stumbled ...

Meanwhile, the winds of American democracy also vary and, towards the end of 2006, the new Democratic majority had doubts that the FTA would be advantageous to their country. The omelet is turned over because, besides the doubts and objections of the neo-populists, mostly from the left, in the sense that America wants to eat the world and especially Latin America, it turns out that now a majority of American politicians believe that Latin America represents a threat to their economy and welfare. And there is resistance to accepting the FTA as a means of progress and wealth for everyone in this globalized world with economic, labor and cultural integration.

A common currency is one of the commercial bases that supports this trend of integration. Ecuador, Panama and El Salvador, at various times, adopted the dollar as their monetary sign. Other countries, such as Argentina, could follow suit, but politics prevailed over technical decisions.

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With the FTAA or not, trade integration is occurring gradually, although many Latin Americans and North Americans are reluctant. On both sides, there are multiple arguments, some are reasonable and others are only to protect privileges and force competition away from their businesses.

In the world there are three major economic blocks with their key currencies: the yen or the yuan for Asia, the dollar for America and the euro for Europe. In Africa a winner still has not been confirmed but it may be the Republic of China (communist, but capitalist when it is convenient), because China has shown an interest, which is not at all shy, in the black continent for its brilliant economic future as a supplier of some raw materials and as a huge consumer market.

Globalization is equivalent to free-market, leadership, efficiency, creativity and innovation, where the most important element in this chain is the consumer, who must be satisfied with quantity, quality and price. That leads us to improve productivity, increase competitiveness in the country and thus improve the quality of life of its inhabitants.

The 21st century is that of efficiency and the struggle to enter markets by adding value to exported goods. Therefore, the more value or differentiation a country adds to its products, the more wealth and prosperity it should bring to its citizens.

Ecuador has to change to be ready to face the globalizing challenges, but near the end of the first decade of the 21st century, reforms have not begun.

For this reason, I point out that the U.S. has a great responsibility towards the continent. Its way of doing business, its culture, its products and services influence and serve as an example for the region. Unfortunately, not everything is as it should be. So, what idea has the U.S. sold us about itself? That it is a country with a society and leaders who are ethical and correct, who follow the rules of the free market. Instead, what have we seen in recent years? Accounting scandals and financial irregularities at big companies like Enron and WorldCom, among others.

United States has sold over and over again the ideas of free markets and the need for the World Trade Organization (WTO). However, it is the protagonist of the steel and orange juice wars (see Chap. VI) and subsidies to the agricultural sector remain at an approximate cost of 340,000 million dollars in the last ten years, which means six times the official development assistance. Thus, the perception is that, in reality, there is no free market.

It has been repeated insistently that respect for human rights in the United States is one of the values prevailing in society, but migration policy implemented from the White House does not show it. I do not mean that doors should be opened to terrorism, but the rules of universal coexistence and solidarity and humanitarian attitudes should be respected.

United States and its leaders must open their eyes: their errors are giving tacit support to the ideologies of the left that are reappearing in the world. Some of the

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attitudes of the U.S. government are actually supporting the growth of leaders like Venezuela's Hugo Chavez and other anti-integration figures, who are demonized and elevated to the status of an antichrist.

These supposed ideological positions are power struggles and political strategies to polarize the world. Those leaders invent a new way of life and sell it with marketing strategies that succeed in aligning countries in their favor.

The great leaders of the modern world, who make up the G-8, are those who impose the rules of the game on issues such as trade, environmental protection, human rights, and labor relations. However, there are some double standards and hypocrisy in dealing with these concepts, not to mention that many times they are due to the vested interests of expert lobbyists who defend the interests of other countries or entrepreneurs of the G-8.

For example, child labor is questioned, but it is not said that, if Latin American countries were to add more value to the products marketed, parents wouldn‘t need their children to work because the export potential would be greater and, therefore, salaries would be sufficient to support a family Concepts are generalized, reflecting ignorance about the traditions of our countries. Child labor in sweatshops is not the same as rural peasant family work, where the children are an integral part of a culture in which the entire family provides the labor needed for success with crops coupled with nature‘s cycles.

Another of the inconsistencies in U.S. foreign policy took place in June 2002, when the G-8 began to pressure the IMF to inject money into Brazil because the country, which was close to an election process and was affected by the spread of Argentina's financial economic crisis, started having problems. In one day it was given U.S. $ 10,700 million. How is it possible that there is an insane asylum where they use patches instead of repairing structural problems?

Latin America is not stupid. Nor does the region want to be given anything that doesn‘t belong to it. In the 21st century, you have to play fair in all areas, such as negotiation, collaboration and external and internal policies. Europe performed the task with a unified currency. The U.S. must promote Dollarization across the continent rather than patching the gaps to overcome the current economic situation.

What America needs is a strong currency that doesn‘t destroy the welfare of the majority. It needs to standardize goods and services so they are easily comparable. It needs to require the strengthening of human rights, but even more, the strengthening of civil rights, using legal certainty and standardizing the procedures of the courts so that a regional bloc really exists. The United States should even consider that if a single system is strengthened, they would be the first beneficiary because, by improving the standard of living, they would have sincere allies and strategic partners.

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There is no greater coward than a million dollars. Investors run at any hint of insecurity, whether legal or financial. Populism can be implemented as much as you like, as in Argentina with the support of the IMF during the 2001-2002 crisis, but the ships were burned in the short or medium term. The result was a terrible impoverishment that has passed the bill to the middle class and most vulnerable people.

The United States must rebuild its foreign policy in South America, because its actions and reactions show a lack of knowledge of our reality. Today, more than ever, in the new world geopolitics post 9-11, the power in the North has to strengthen that relationship and help change the setting to achieve a profitable permanent relationship. The United States must commit to being on the side of its neighbors, but not with specific gifts and for the short-term, but supporting a process of economic and social restructuring to ensure changes in the continent‘s living conditions in general.

It is undisputable that the U.S. is the largest economic power in the world but you must understand that if it invests in Europe or Asia, the results of that investment are not going to come with the same speed as if it were in Latin America: a higher level of life in Latin America brings a greater increase in this region‘s purchases from the United States. This is why it is surprising that every time a Latin American country adds value to its products, such as steel or orange juice from Brazil, the United States sets up trade barriers.

The U.S. has three hundred million inhabitants and Latin America has 600 million potential consumers. Therefore, preventing a Latin American country from adding value to its products means plunging it into poverty, promoting the breakdown of democracy and pushing their natural allies to become rivals.

A good entrepreneur has to look at the forest and not the tree. In marketing, we talk about customer service, customer satisfaction, corporate image, efficient public relations and assertive communication. It is also said that a company does not just have to make a sale but rather to keep the customer through the time.

The same thing happens with countries: instead of correcting the problem to become more competitive, the U.S. government raised barriers to foreign steel, when the logical solution was to correct the internal problem and let the competing countries obtain a better standard of living, higher purchasing power and a stronger financial market.

U.S. foreign policy with Latin America, especially South America, needs to be revised. The results of this bad practice have been seen in Venezuela with Hugo Chavez and in Peru, with Alejandro Toledo. The same has occurred with the problems in Argentina, Colombia and Bolivia. A destructive left is advancing (not the smart socialism of Lagos and Bachelet).

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What happened in Ecuador in April 2005 when President Lucio Gutierrez was ousted showed that it was a strategic plan of Cuban President Fidel Castro, strengthened by Chavez's Venezuelan oil. Populist heads of state, who claim to defend the poor, are the most efficient producers of misery, hatred and sectarianism.

It is time that America learns that if it wants to help its own economy and domestic social peace, it must rethink the role of the International Monetary Fund (IMF), the World Bank (WB) and the Inter-American Development Bank (IDB). It is necessary to play fair and promote sustainable economic growth across the continent. Unlike these organisms, the Andean Development Corporation (CAF) has supported several projects of great importance and fulfills a very valid and redeeming mission. § The real goal of multilateral institutions

In the international institutional order, some multilateral agencies were created with laudable humanitarian goals, worthy of a modern and civilized society, basically to bring third world countries to prosperity and to seek to strengthen fairer societies with less inequality and more opportunities for their citizens.

However, some of these entities have been discredited, since the goals for which they were created have not been met. In the 21st century, measurements are based on results and task performance.

The reason for the disrepute is clear: poverty is growing in our countries and the unequal distribution of wealth is also worsening. The strategies proposed by those agencies are contradictory and unrelated to the cultural reality of countries and regions of Latin America.

These institutions require governments to raise taxes instead of lowering costs (it is part of the Argentine tragedy). They give money to support bureaucracy or to give jobs to consultants, but not to get them out of poverty.

Joseph Stiglitz, a world renowned economist, categorizes the typical measures recommended by the IMF as the "Washington consensus" since it appears that these proposals are repeated throughout the region as if they were a ―one size fits all‖ measure.

When problems began in Argentina in late 2001, it was predicted that if this were not managed well, Brazil would become infected and even Chile could suffer a blow. Instead of Dollarizing Argentina's economy, the IMF did the opposite: it tried to keep dollars in the currency reserves to meet the maturing of US$ 900 million of debt to these institutions, but this caused the country‘s collapse. The IMF could have prevented thousands of deaths and massive impoverishment in very few months.

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These institutions need to rethink their strategies. They have lost their objectivity and have not been updated. Globalization produced a fundamental change in technology and therefore also in the habits, which are always different, of every group of people.

Methodologies were not revised after the fall of the Berlin Wall. They were not reformed to promote productive economies in a world where the theories from CEPAL fell and where the removal of barriers and free competition mean that prosperity is achieved under much more complicated schemes They didn‘t realize that today's economics and psychology go hand in hand, and that the impositions cannot come from ignorant people who make strategies without knowing the market and the country where they want to implement them.

While it is true that Latin American countries have common roots and similar vices, cultural identity depends on the regions, climates, migrant groups, education, and traditions. The reactions are not the same and the markets behave differently.

Officials did not realize that it is a mistake to think that living a few years in a foreign country as delegates of these organizations entitles them to say that they fully understand them and make the wrong plans. They are repositories of knowledge, which is influenced and tainted by a single form of seeing the reality of a country, but does not know it in depth. That is why what they do in Ecuador, which has important regional differences, idiosyncrasies and peculiarities, which are sometimes hard to digest even for the same Ecuadorians, is so serious.

When a crisis occurs, these institutions should immediately analyze what the real problem is, what internal or external reasons have generated it, what the real perception of the economy is, and how people should act to make corrections to cause the least harm to the majority of the population.

The multilateral institutions have established offices in countries that implement their programs. However, their policies, reactions and solutions are designed in Washington by former national bureaucrats who have become international bureaucrats stuck in the theoretical concepts of an echo chamber, which is nothing more than listening to each other and repeating outdated theories.

The world has changed, but they don‘t handle new paradigms. They don‘t propose advanced changes to prevent crises. They react to conflicts, but they cannot solve them because their solutions are the result of feedback from third-rate bureaucrats presenting figures and analyzing them using unrealistic parameters.

In the case of the IMF, its members are mostly former officials of the central banks of the same countries, with ideas from two centuries ago, who have coercive power: "If you do not implement our rules or policies, we will not give you the rating needed to qualify for aid."

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For them, ―the end justifies the means", but the worst thing is that neither the means nor the end is reached. Their economic policies are wrong: if the banks or financial institutions are bad, far from forcing them to carry out an internal review, to restructure and strengthen themselves, they are pressured to raise interest rates rather than to make the financial system become more efficient.

If it‘s necessary to balance the budget, instead of forcing the government to reduce spending, they pressure it to raise taxes. William Easterly, a University of New York professor, member of the Institute for International Economics in Washington, and former World Bank official, is harshly critical of this institution for its failure to remedy poverty in the world. Easterly argues that this fiasco is because the WB has not applied the principles of economy to political practice, since the Bank‘s solutions have violated the basic principles of this science. They do not realize that people, ordinary citizens, private companies, government officials and benefactors, respond to incentives. Correct incentives move people, not impositions, obstacles or quirks.

They seem to understand that prosperity must be punished, those who create wealth must be punished by harnessing them with excessive taxes and using discretionary powers. Far from considering devaluations harmful, they consider them to be attractive and promote them: that is absurd.

MSMEs (micro, small and medium enterprises) usually thrive on the domestic market and, if this is solid, capital is made more democratic, by generating opportunities for small businesses. However, if consumption decreases dramatically, they are destroyed. That is why devaluations in Latin America have been tragic while some inefficient exporters became rich and many bankers turned speculation into the center of their business. What can be said about the enrichment of certain central bank officials, who through discretionary power moved monetary and exchange rate variables as they desired for the benefit of those privileged groups.

The IMF does not understand that it cannot continue protecting politicians who grossly squander these loans. This cannot be done with the bankers, who far from becoming efficient and having a business that generates resources through production, support speculation and the lack of competitiveness. So long as the mega banks of the great powers merge to reduce costs, Latin America supports the inefficiency of the micro-banks, pressuring them to pass the bill to the population through high interest rates that are unsustainable and lead to the collapse of the economy.

Multilateral institutions provide support to institutions that do not need it because they are seeking educational improvements for the upper class and not the lower

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classes, or in areas that are not so poor. They give money to consultants whose results end up in the libraries of hundreds of state institutions.

However, when programs are negotiated, these institutions are bound to support each other and act together in the sense that if they don‘t support this program, then there will be no disbursements for that program.

With the excuse that they cannot intervene in the internal policies of countries, they agree to give money to unimportant programs when there are others that are vital, although politicians give them less applause. They don‘t prioritize key projects to reduce the gap between those who have the most and those who have the least through an efficient education system.

Most of these institutions have done little to reduce poverty. With honorable exceptions, they are giants that are even slower than the bureaucracy in third world countries, and they are not in touch with the problems of Latin America.

The IC2, which is quite a popular notion today, means Innovation, Creativity and Capital. It is an extremely important concept for 21st century globalization, which demands competitiveness. It is an extremely necessary concept for rethinking the plans of multilateral institutions, because if there is no innovation and creativity, capital cannot be used to create opportunities.

It must be emphasized that the CAF is the most updated institution which lives on the stage of the real world. This is not the case of the World Bank or the IDB, whose monies are given to programs that often have little importance, through political intermediaries, and only 20% actually goes to the people. At the same time, the little that is received from these institutions is devastated by the devaluations that are the IMF‘s multinational prescription.

What happened in 2001 in Argentina demonstrates the ineffectiveness of the IMF. How is it possible that the Fund took no position when faced with an economic plan, which stole from the people and passed the bill for inefficiencies, to which they had given their support, to the middle class? How can the IMF and World Bank form their work teams with Ecuadorian professionals, who caused the crisis in Ecuador? It seems to be a vicious circle of paying for favors and trade relations.

The facts show that, in Ecuador, these institutions did not learn anything.

The IMF has passed through Ecuador, but the most important lesson they could learn was not assimilated: Dollarization would eliminate the discretionary powers in Latin America and, in the case of Argentina, it could restore faith in the long term.

While devaluations apparently promote exports, what they actually do is offset inefficiencies. They are also the easiest and most hidden way to steal from the

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pockets of the poor and the people who depend on a fixed salary. They are so harmful that they destroy domestic consumption because sweeping away the domestic market eliminates the possibility of generating prosperity in the micro, small and medium enterprises that make a living in that market.

For companies, planning becomes impossible because, technically, it is impossible. The discretionary monetary decisions are transferred to third parties and transform nations into casinos. It has been proven that exports grow when there is stability and this is not achieved with devaluations. Stability is achieved with Dollarization, not with convertibility.

In Ecuador, multilateral institutions, notably the IMF, permanently lived the philosophy that "the end justifies the means" and "the captain rules", prioritizing benefits for a tiny group of banks to the detriment of thirteen million inhabitants.

At the most decisive moment of 1999, the IMF experimented the awkward handling an economy in crisis, noted how a recessive economy collapsed under the freezing of bank deposits and watched the lightning speed with which this freezing increased poverty.

In this way, the crisis became widespread and, in a few months, this impoverishment generated a very large bill to pay. This is what Americans call a no win situation. The experience in Ecuador cost us deaths and the exodus of people who went to swell the ranks of undocumented foreigners overseas.

Steve Hanke said that apparently the IMF knows that the Central Bank of Argentina is a photocopy of Enron. That is true because otherwise we cannot accept that, instead promoting Dollarization, which would have allowed the return of capital (of course, if that Dollarization were accompanied by fiscal discipline and an acceptable program of economic recovery), it promoted cleaning up the debts of a few through the mirror effect among people who bought dollars one by one and then, with a small percentage of the same dollars, paid their debts. Meanwhile, the retirees, the elderly, and the middle class were robbed; their money was returned drop by drop in devalued paper currency.

If the IMF had fulfilled its task, what happened sooner or later in each of the countries using local currency without fiscal discipline, would never have occurred.

In this way and through a number of other economic manipulations, they always passed the bill to the people for the benefit of politicians, which, in turn, ended with the banks‘ fall, the collapse of the economy and the impoverishment of the countries in the region.

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It is urgent to hold all multilateral lending institutions accountable, as the cost versus the benefit is daunting, especially in a century such as the present one, in which electronics and communication allow these institutions to meet the goals for which they were created much faster: bringing third world countries to prosperity, making a more just society with fewer inequalities.

Rethinking the rules and the role that the IMF and other institutions that have an impact on America should play is a vital need for Latin American citizens to move from the role of victims to that of citizens and begin to achieve first world prosperity. That's the purpose of this second and final independence that we are trying to reach through Dollarization in Latin America and in all of America. § Central Banks, why?

Does the existence of central banks fit in? Haven‘t most of them been and still are the institutions that allowed the most arbitrariness? What more privileges have they given? Haven‘t they caused corruption in many countries? In managing monetary policy and exchange rate, it was at their discretion to move the exchange rates and / or liquidity at their will, as well as giving timely information to their golden circles of friends as to what and when it was going to be done. With this immoral insider's information, the country (as in the case of Ecuador) changed from a producer to a speculator, that is, it became a casino, causing the economy to collapse, and causing devastating impoverishment; therefore, in just the year 1999 (measured in dollars) to GDP fell by over 28% (in patched official figures). Even more unconceivable is that those who caused this tragedy are now part of the bureaucracy of the IMF, the World Bank, and the IDB, in other words, they are still acting in the organisms that helped or preyed on the weak countries, but continue to exercise, directly or indirectly, the malevolent discretionary power. Therefore, the bad results that make Latin America continue to have poor growth and a large migration of its people can easily be seen.

In the case of Ecuador, the functions of the Central Bank are very different after the Dollarization: It maintains its role in maintaining economic statistics, economic studies and even cultural work, but it no longer has the wrongly used discretionary power of monetary issue. I do not mean that all countries have handled it badly, but when it was a cause of impoverishment in Ecuador, there was nothing left to do but to put a straitjacket here and to suspect that similar irregularities exist in other central banks ...

CORRUPTION = MONOPOLY + DISCRETIONARY POWER-ACCOUNTABILITY The equation that results in corruption—monopoly plus discretionary power without accountability, cannot be more forceful. It is the basis of the tragedy of most

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developing countries. Ecuador, for example, is dominated by state monopolies run by an elite called the golden bureaucracy, which is largely corrupt, while in others, there are political quotas to pay for campaign favors. With the overused speeches, that these monopolies are the "crown jewels or ―the people‘s jewels", what they have done is extort money from the population, prevent foreign investment due to the lack of reliable basic services or excessively expensive basic services and, therefore, they have kept magnificent growth opportunities away, especially for micro, small and medium enterprises.

The same equation speaks of "discretionary power", and it generates a great deal of corruption ... "For you, yes, for you, no" is the abbreviated formula of that discretionary power, which generates privileges, the possibility of allocating concessions and benefits as it suits them. That unhealthy power is what has caused most of Latin America to give priority to the benefits of those who are close to power, undermining the right of citizens and the possibility of strengthening the middle class. Look at the Ministries in Ecuador: in general, rather than institutions for promotion and development policies, they are agencies that provide stamps, permits and procedures, which not only increase the cost to the country, but give rise to corruption and do not add value to society. This, in turn, leads to having no accountability because it removes the power of the masses, thus irritating and discouraging civil society from a conduct that demands their rights, and weakens democracy by not complying with its rules. This is what happened in Ecuador in 1999 and in Argentina in 2000 and 2001, where the corruption formula has been applied to the Central Banks: currency monopoly plus discretionary power of the same, without accountability: the result? A violation of human rights. § Women, NGO's and other strengths in the region The qualities of NGOs, especially those inspired or supported by religious values, however, allow programs to be set up that actually decrease poverty, as is the case of some cooperatives that develop small scale economies. In my country there is, for example, Salinerito, promoted by a Salesian priest. It now exports cheese, meat, dried mushrooms and other food products of the highest quality, efficiently produced in factories that are in the central area of Ecuador (Salinas, Bolívar Province) at 4,000 meters. Another case, also in the central area of the country, is CEBYCAM (Penipe, Chimborazo Province), which is run by an other priest who brought an entire population out of the state of being disabled as a result of the lack of iodine and they set up a shoe industry-with leading edge Italian technology and other products, that are accepted in the competitive domestic market because of their quality.

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In Latin America, women are the pillars of society. There is a high percentage of single mothers and, unfortunately, this statistic is higher in the sector of the less educated population. It is important to save this group of women, who are usually young, of a reproductive and productive age, by generating self-esteem and basic skills to form micro-enterprises, which allow self-management. This, therefore, will produce the appropriate income to improve their own standard of living and that of their families, and allow their children to have a better education than they had.

There are international and local experiences, such as the Grameen Bank, founded in Bangladesh in 1976, which show that supporting women is the best bet to strengthen families and society in general. This effort is so well known and valuable that its inventor, Muhammad Yunus, received the Nobel Peace Prize in 2006.

On the other hand, I have seen many opportunities to create child care centers that have been frustrated because, with much effort, they managed to get money for the construction, but their maintenance was impossible. Thus, in this case and others, volunteering in my country is limited to doing 10% of what could be achieved due to the lack of resources. These child care centers, for example, would allow mothers to prepare themselves and be micro entrepreneurs, while, at the same time, during their first years of life, these children would have a better diet that would prepare them to assimilate a better education. However, these nonrefundable economic programs practically do not exist. ยง The role of political parties The 21st century is the century of globalization, in essence, that is a phenomenon where the consumer, who has rights and seeks to benefit, becomes key. We must recall that, in essence, the consumer is the citizen. Therefore, this will be the century of competitiveness, innovation, and intelligence. The global scenario has changed and the rules of the game are also different today: democracy is freedom, and I insist that freedom implies respect for the citizens and their options: Respect means to make that citizen succeed because in that way the country will grow with opportunities and there will be true prosperity. Consequently, political parties should make proposals that will allow emerging states to have favorable investment scenaries, to achieve State policies that go beyond government policies, to help the governments in power so that instead of forming an unhealthy opposition, they push for the big transformations that allows those state policies that go beyond government and generate sustainable development, respect for the rule of law and due process.

Today, political parties in third world countries are discredited because they do not meet the expectations of the people, especially the young people, who need and

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want countries with clear long-term rules that prioritize opportunities. Legal certainty is essential; for this it is necessary to carry out a "legal cleansing", because the excess of currently existing laws favors discretionary power and, therefore, the uncertainty of respecting citizens' rights. Let us not forget politicians‘ accountability! § The “Stoppers” In the equation for corruption another barrier that strengthens corruption should be added: "The Stoppers"; those who do not allow anything to be done, "those who only say no."

In my country, Ecuador, during the Cenepa war, President Sixto Duran Ballen appropriately said, "Not one step back." After the war I said, "Not one step back, thousands of steps forward, because if we don‘t move, we‘ll go backwards because the competition is moving forward." I never imagined that my belief was going to be a prophecy because, unfortunately, ―not allowing anything to be done‖ immobilized the country year after year, making it go backwards in relation to other countries until the collapse of 1999.

The same system takes place in most of Latin America: ―the Stoppers‖ are the tool of extremists and those who say we are doing badly because neoliberal policies have been implemented; this attitude has prevented the development of industries such as oil, energy and communications.

They are the reasons that investment doesn‘t come to our countries and we suffer the ravages of monopolies, etc. And others are opposed to liberalism or neoliberalism in such a way that these labels are used as tips by leftists stuck in the past. In addition to Dollarization - but based on it - we need a whole scheme of steps to become free and independent from poverty and backwardness.

Whoever does not advance goes backwards.

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Chapter III ยง At the gates of Dollarization The problem of the currency in Ecuador is not that the currency was changed, but that the Sucre was murdered. And, of course, if most transactions in the country were in U.S. dollars, we would not be so stupid to go to the euro. The change of the currency - an irreversible fact, which could have been distinct and we have seen a clear example in Chile - is due to our naivete because we allowed four hoodwinkers to rise with a kind of campaign that cheated people and as people do not investigate and cannot remember, they fall into the trap ...

Before giving birth to the idea of Dollarization, it was very clear to me that the goal of any society is to achieve the best possible standard of living, which led me to believe that Ecuador could not continue to be chaotic.

I wondered how we could achieve benefits for the majority, the democratization of wealth and the elimination of poverty. That taxes generate the redistribution of wealth is a fairy tale. I know from my own experience. ยง To believe again It was September 1998. For the first time in Ecuador, a voice was heard publicly demanding the adoption of Dollarization system as the best alternative for achieving stability of the economy, laying the foundations for a radical change in the mentality of Ecuadorians and achieving the much coveted sustainable development.

It was my voice. Of course I received negative comments and, at certain times, even rude ones ("what nonsense", "how absurd", "what madness") when I spoke about the need to change the sucre for dollar at social gatherings, informal discussions, forums, conferences and seminars.

I continued by starting the movement in favor of Dollarization of the economy, to create a group of apostles who would help plant this revolutionary idea in the country. The idea was that civil society would understand why it was necessary to wager on a system that would recover the purchasing power of the currency.

Thereafter, a personal story and one for the country began: my own, an enriching one, and that of Ecuador, a hopeful one. I proposed that Ecuador move up from the last positions in Latin America to the top ones. I proposed that abroad, people would start talking about positive things in my country. I proposed that the 70% of Ecuadorians who are young would have confidence in the future. I proposed giving them monetary and exchange stability and rules for fair play in the long term.

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I had to begin to believe again, to grow again, to act in the interest of the majority and not of sectarian groups. We had to stamp out corruption by eliminating the discretionary powers. Beginning this fight was worth it. I knew it would be long and hard, but it was necessary, urgent and essential. § Gestation and birth All governments had faced crises by taking short-term measures, but these only served as palliative against the cancer that gnawed the economy of Ecuador. By elementary logic, the majority overwhelmingly called for the need to take drastic decisions to change the model. However, nobody dared to do so for fear of losing popularity ratings.

Political leaders, forgetting their responsibility as statesmen, by actions or omissions - allowed the deterioration of the economy to seriously affect democratic stability and the purchasing power of the majority of Ecuadorians.

It is still painful to recount the preambles of Dollarization. I cite, as an example, the blackouts which started on February 2, 1992 during Rodrigo Borja‘s presidency.

Thus began the deepening of poverty. Another crisis occurred with the enormous obstacles to privatization that were put in place by the government of Sixto Duran Ballen. The opposition, which had appeared, crushed the opportunity to complete a plan based on anchoring the dollar to attract investments in public goods and to reduce unemployment without raising taxes. It was, in my view, the best way to revive the economy.

The blockage was huge. Giving concessions to the Electric Company Emelec was not allowed. There was a bad negotiation by Ecuador for the country to join the Andean Pact. There were slow government decisions to eliminate monopolies and open competition. And the Central Bank, as always, ran the "printing press" to print sucres and solve financial emergencies of the government, but going against the interests of the people and contributing to inflation.

In their search for mechanisms to implement the Duran Ballen plan, authorities took the first step: anchoring the exchange rate. However, the opposition prevented them from implementing the other measures and thus, interest rates skyrocketed.

The press picked up my concerns in those days: if interest rates were not controlled, the productive sector would begin to collapse. Interest rates should not be at 60 or 70% with inflation at 22%. It was economic suicide.

With the implementation of these measures, businesses‘s assets were transferred to the speculative sector. Today, looking back, these concepts had a premonitory

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value. Ecuador turned to speculative investments, and forgot about the productive sector and the real economy. At this moment, the bank and financial crisis was born.

Here is a digression worth mentioning: in 1993, the government planned on raising the Value Added Tax (VAT) to 18%. If it had gone into effect, they would have thought of increasing it to 21% or 25%. This is a mistake, since a tax increase does not solve problems. It temporarily defers them and increases government resources, but does not increase production.

Fiscal rationalization is necessary and taxation makes sense within the economy, but we must be clear that these are not the solution, only a further step in the larger strategy for achieving development. If you want to stimulate economic growth, obviously a tax increase does not support that strategy.

Unfortunately, governments have repeatedly chosen ―patch‖ type solutions, without opting for radical change.

In October 1993, Vice-President, Alberto Dahik promised his strong support to the small and medium business sectors. That should have turned into a direct fight against the diseases afflicting the productive sectors. Dahik told the country that we had to compete on equal terms with large foreign companies. Therefore, he strongly recommended improvements through the reduction of lending costs, but he never took that action.

On making a balance for the year 1993, I weighed the facts: we had started by sowing hope and ended by reaping sorrows. It was another lost year. There were more patches to the economy, and, as if that were not enough, they intended to compensate the lack of governmental decisions by passing the bill for inefficiency and corruption to the businessmen and the people.

In June 1995, the amount of the active interest rates became a scandal: it exceeded 100% and then reached 120%. According to the Central Bank, this situation was caused by the withdrawal of 80 billion sucres from the market, money that the bank had intended to use to pay taxes. Incredible!

I immediately demanded that the Central Bank solve the problem, because if it didn‘t, business dismotivation would increase to dramatic levels. I warned that an interest rate at those levels, in the midst of financial and exchange speculation, would trigger hyperinflation.

The authorities didn‘t listen. No measures were taken. And, unfortunately, time would prove me right.

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The same as in the government of Duran Ballen, all presidents have a common denominator: spending, no concern about promoting production, ignoring the generation of jobs and finishing their terms with no major complications. The country of future is hanging in the air.

In October 1995, Alberto Dahik resigned as vice president of the republic because of a detention order issued by the President of the Supreme Court arising from alleged mishandling of reserved expenses. It was another ingredient for increasing national uncertainty and the economic crisis. The interest rates remained extremely high, there were severe power cuts and bank speculation deepened.

How could I keep thinking about economic recovery? I didn‘t let myself be overcome by the circumstances. That same month, during my address to those attending the VI Latin American Congress of Women Entrepreneurs, I said: "There is only one recipe to get this country out of its extreme poverty. And this recipe includes macroeconomic stability, reduction of the size of government, deregulation, privatization and ending the monopolization of pension funds, where almost everything remains to be done and it is the fault of government powers (...).

In December, the new pay increase which would take effect on January 1996 was being discussed. The entrepreneurs agreed with improving the incomes of workers, however, in many cases, their proposals were below the government's aspirations. The businessman, with ethics, justice and equity, properly pays his employees well. So does the intelligent one: he tries to pay his employees well because he needs them and if he does not pay them well, the competition will take them away. However, what cannot happen is to have wage increases set by law that are higher than inflation.

It was imperative that all sectors lay aside our differences and unite efforts to move the country forward. Therefore, after the military conflict, I called the former presidents of the republic to make a macroeconomic plan for the country in the 21st century. No former president paid any attention to my call and only one of them said he thought it was a very good idea, but he did nothing.

I didn‘t feel that I had failed. Rather I thought I had a new challenge and took up the challenge. From the Chamber of Small Industries of Guayas and alongside Leonardo VicuĂąa, I designed the Economic Plan "Ecuador into the new century and millennium: A proposal for action, development, justice and equality."

The proposal was ready in late 1995 and was presented to the country on January 2, 1996. It was an ironic situation: the plan received the approval of all of the candidates for President of the Republic, who convened in the CAPIG to submit

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their plans of government. However, none did anything to implement the plan and they did not even take it into account as a campaign proposal.

On August 10, 1996, Abdala Bucaram, winner of the election, was inaugurated as President of the Republic.

Two months later, the new president would propose the convertibility of the currency as of July 1997, with a conversion rate of S /. 4000. It would have been perfectly feasible for that to happen, because at the time, the exchange rate had reached 4017.04 sucres per dollar.

But a new political crisis caused the proposal to be set aside and, instead, the promoter of this idea was overthrown on February 7, 1997. Bucaram's fall was due, in part, to the usual politicians, but also to the errors of the former president himself, for corruption and offenses to his opponents and all Ecuadorians. He also fell, from my point of view, because he wanted to achieve structural changes that many powerful economical and political people would not accept After the departure of Bucaram, Congressman Fabian Alarcon stepped in, placed in the Presidency of the Republic by certain politicians who sought a puppet they could move for 18 months to do whatever they pleased.

Alarc贸n's rise to power was a huge mistake for the country, since the only thing that changed was the color of the briefcase: theft by spoonfuls from the period of Bucaram was changed to theft with "champagne." Ecuador lost a year and a half of development and backwardness deepened: Alarc贸n came to power with an exchange rate of S /.3.738.53 per dollar and left power with the dollar at S/.

5.300.43 on July 31, 1998.

Alarcon called for a referendum to justify his usurpation and mask its unconstitutionality. During that period, oil production fell to 101 million barrels and inflation increased from 34.20% to 78.10%.

By 1998, we had fully structured the Dollarization proposal, but we were in an election campaign and everyone, especially future president Jamil Mahuad, said that they had the agenda that would lead us to prosperity.

So, I delayed launching the economic plan, with Dollarization as an axis, to see what would happen with the winner of the elections

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Chapter IV ยง The crisis erupts Many people in the country were used to criticizing or diagnosing, but never to providing solutions.

Jamil Mahuad was sworn in as president on August 10, 1988. The country began to understand that the new government was more of the same, a management that the president called "one by one" and announced the style that would end up in a new political tragedy: to address the problems in order of alleged priority, but only one after the other.

Mahuad's first priority was, no one knows why, the negotiation of the border with Peru. In the meantime the issue was mixed with the eruption of the volcano Pichincha, which aroused so much fear among the people of Quito. Fortunately, in the end nothing serious happened. Was this a government smoke screen to distract people in the capital? Mahuad seemed not to notice that the first topic, the seriousness of what was coming, was economic.

September came. It was then that, once the implementation strategy had been designed, and when the dollar was at 5899.36 sucres, I publicly presented the idea of Dollarization.

I proclaimed an exchange rate of 8,000 sucres per dollar for the start of the system. It was necessaray to leave a cushion for the exporters.

It was not easy. Until December, I was alone with my idea, but I stayed very active and determined to push it ahead. On December 21, 1998, I conducted the first forum entitled "Rescue of the Ecuadorian Economy. Part I: Total Dollarization, convertibility, absolute floating or what. " The famous or what started because many people were accustomed to participate, criticize, or diagnose, but never to offer solutions.

I was able to get the participation of Walter Spurrier, Jorge Gallardo Zavala and Alberto Dahik (via microwave from his exile in Costa Rica).

By then, other economists were supporting my idea and the forum was successful: it was attended by journalists, media managers and leaders of the civil society.

Thanks to this, the first echos in public opinion appeared. Obviously, I favored Dollarization, but Dahik was for convertiblity, Gallardo for total floating and Spurrier was undefined.

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Then came the fateful 1999. On January 30, I participated in Quito in the Cusin group III, a forum of national leaders. This time the subject that brought us together was "Consensus for Ecuador's economic stability."

The meeting's goal was to push the political leadership to build stable legislative majorities with a horizon of certainty: ensuring a policy of promoting sustained economic growth, increasing employment opportunities and lowering inflation to single digits.

But we demanded a commitment to immediately assume balanced public finances which would be kept in the long run. The proposal, as relevant then as now, included: • Adopting a policy of rationalization and efficiency in all public expenditure, which should concentrate mainly on social investment.

•

Implementing an efficient and equitable tax system.

•

Eliminating superfluous and unnecessary spending.

• Decentralizing resources and responsibilities as a means of developing public participation and genuine national unity and solidarity.

• Reducing debt service through appropriate mechanisms to release resources for development.

• Allocating debt only to public investment and keeping it compatible with the country's payment capacity.

• Prosecuting and punishing those responsible for criminal acts and fraudulent practices in banking, tax and state administration.

• Eliminating tariff exemptions for all public and private institutions, eliminating corruption and improving the administrative capacity of the state.

• Recommending the issuance of a tax code to streamline the national, municipal and sectional tax systems, based on the principles of universality and equity, and making it an instrument of wealth distribution and decentralization of resources.

• Reducing the tax gap on the revenue side by removing all exemptions to VAT in a joint effort of the public sector and taxpayers.

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• Establishing compensations targeted to low and low-middle income areas.

Similarly, there should be automatic compensation to public sector institutions, in order not to create new financial distortions in this sector.

•

Maintaining free public access to all information on taxes.

• Taking care that the allocation of public resources is done in such a way that society aware of their destination.

• Legislating in such a way that those responsible for managing the budget and public entities are accountable for their management. The law must specify time limits and mandatory reporting mechanisms and the sanctions in case of noncompliance.

• Assuring that discretionary expenditures by the Ministry of Finance do not exceed 2% of current expenditure and they form a budget with base 0.

• Establishing that in the case of unanticipated changes in current revenues in excess of 5%, the Executive shall propose a solution to the situation to Congress.

The Central Bank shall issue its opinion. The same process must be followed if there is change in magnitude greater than 2% in debt service.

The reader can imagine the fate of our proposals at that time: the dustbin of history.

In that same January, my first convert to Dollarization was Franklin Lopez Buenaño, a man who, like I, knows the meaning of the revolution of ideas and change.

Thereafter each of my statements in the media denounced the urgency of dollarizing our economy, which, as we know, in practice, although not officially, was already 70% dollarized.

I reinforced the concept during the second part of the event "Rescue of the Ecuadorian Economy: Total Dollarization, convertibility, absolute floating or what. " The new forum was conducted between February 1 and 2, 1999 and I was a panelist on both days. On the first day we had the participation of the CubanSpanish journalist Carlos Alberto Montaner, the economists Francisco Swett and Abelardo Pachano.

The second day involved economists Carlos Julio Emanuel, Pablo Lucio Paredes, Franklin Lopez Buenaño and Dr. Mauricio Torres. In the two days, all but Abelardo Pachano were in favor of Dollarization. I was beginning to reap what I had sown alone.

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On February 8 and 9, the event "The current model has been exhausted.

Alternatives to follow: Dollarization, convertibility or what" was held The first day we participated with former Finance Minister Pablo Concha, and the economists Bruno Faidutti and Xavier Neira. On the second panel, I was accompanied by the economists Cesar Robalino and Leonardo VicuĂąa.

Simultaneously and as a support, the magazine published by the Chamber of Small Industries devoted ample space and editorials to the issue of Dollarization. § March 8, 1999: The corporate collapse Then came March 8, 1999. Led by banker Alvaro Guerrero, President Dr. Jamil Mahuad Witt, by signing Executive Order No. 685 March 1999, made the greatest assault on democracy and civil rights and, breaking the whole scheme of ethics, justice and equity, he ordered the freezing of deposits in the financial system and a bank holiday throughout Ecuador.

Such a measure was derived from a half implemented recipe from the proposal made by the Argentine team of advisers. For them, the freeze was to last two days, and they would immediately proceed to implement convertibility. But Mahuad opted for the bank holiday, a freeze on deposits and time deposits, and nothing else!

One of the devastating effects of these measures was the immediate closure of 350 companies in the country. The preposterous economic measure had simply caused the corporate collapse. However, the passivity of the people of Ecuador and the complicity of the big winners of the bank holiday, allowed the largest theft of public assets ever in the history of Ecuador. In practice, the President passed the bill for the mishandling of the country's financial system to the least guilty ones: the helpless depositors It was logical that in the early days of the issuance of these measures, economic instability (manifested in rampant inflation, devaluation, the rise in interest rates and speculation) that been present until this moment reversed, as inflation occurs when there is excess circulation without the support of production.

But when a brake is applied to the torrent of money, as was done with the freezing, the opposite happens: the market freezes, since without money there is no consumption and hence prices fall.

As a counterpart, production falls because the industries do not have anyone to offer their products to. And to address the reduction in revenue, the companies reduce jobs.

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The figures are striking: according to the Central Bank of Ecuador, the per capita GDP, that is, the annual income per person in 1998 was $ 1,946, but in sucres. In 1999, it had declined to only U.S. $ 1.376, also in sucres. In 2000, supposedly with a dollarized economy, but still with an economy being converted and without implementing many of the necessary economic measures, income per person fell to U.S. $ 1.296. From that year to 2006 (U.S. $ 3.050) an increase was achieved, obviously through Dollarization.

Under the conditions experienced during 1999, there was no economic movement and, therefore, inflation was under control, but at the expense of the inhabitants‘ stomachs. Of course, in the cemetery inflation is zero. It was under this scenario that I declared angrily against these measures and pointed out that it was an attack on the people and the democratic system in Ecuador.

From that moment I began to place more emphasis on Dollarization as the only scheme that would save the country's economy from the chaos that had been generated. On April 26, I presented the forum titled "Thawing funds via Dollarization and steps for immediate Dollarization," which was attended by Franklin Lopez BuenaĂąo, Francisco Swett, Carlos Julio Emanuel, and Francisco Zalles. But nothing happened: it fell on the Government‘s deaf ears.

After the first surprise effect of the freezing, the dollar rose again, despite being held back through the hunger of people who could not eat or buy anything because they had no money to do so.

The illiquidity of the country was impressive. In December 1999, dollars were sold for more than 18,000 sucres and in January 2000 there were 25,000 sucres per dollar. . Likewise, the average Ecuadorian could not access health care or buy medicines because there was not enough money. The prices of goods and services were also sky high. Although salaries were received in sucres, owners of commercial premises had started to place the commodity prices in dollars. In general, I repeat, the population was paralized, tied up...

This scenario encouraged speculation of many kinds, financial as well as in products and services. President Jamil Mahuad, Finance Minister Ana Lucia Armijos, and the central bank's board favored the existence of a super casino in the country. We should investigate those who became rich with the movements of the former central bank.

To the extent that many people lost their assets, the tears of those innocent victims allowed individuals and institutions, that took advantage of the moment like hungry hyenas, to become rich. From February 1999 to January 2000, people lost 60% of

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their assets. Of this 60%, I estimate that 50% was stolen between November 12, 1999 and January 2000. (See chart: Review of the facts).

Summary of the events in 1999, Ecuador February 11 Directors of the Chambers of production of the Coast met with members of CONAM, and the same day held a meeting with representatives of the Ecuadorian Customs Corporation.

March 8 The Ecuadorian government decreed a bank holiday for 48 hours, which was extended indefinitely, indiscriminately freezing checking and savings accounts and term deposits of all users: personal, commercial, industrial and governmental.

March 11 Press conference given by the Presidents of the Chambers to present their position on the crisis in the country.

April 6 Press conference given by the principal directors of the Chambers of Production of the Coast to present, to the country, their proposal for change.

April 8 "March of the Mourning Bands" and formal presentation to Governor Guillermo Lasso M. of the proposed "Agenda for thorough and urgent change that the country requires" produced by the production sectors of the Coast.

April 9 Presidents of the Unions and Chambers of the Coast met with the President of Congress, Juan Jose Pons Arízaga, to deliver the document ―Unconstitutional Points in the Bill for the Reform of Public Finances."

April 14 Presentation of the President of the Republic to the country.

April 22 "A 24 hour work stoppage," organized by the Chambers of Production of the Coast

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§ The March of the Black Mourning Bands On April 8, 1999, on the one month anniversary of the infamous freezing of bank accounts, the Chambers of Production of Guayaquil organized and led a massive march to demand from the government the fundamental changes that were needed to get the Ecuadorians out of the tragedy in which we stood.

We called it the "March of the Black Mourning Bands" because we wore black bands in mourning for the freezing of funds and the inaction of President Mahuad to get people moving ahead.

For the first time in the history of Ecuador 150,000 people marched, peacefully, and with good citizenship, through the main street of Guayaquil towards the Governor‘s office to demand the return of our money, our rights and our future, which had been foreclosed by the Government.

The " March of the Black Mourning Bands‖, was held on April 8, 1999 and had nothing to do with another impromptu march that took place on March 22 against a banker. The march of the stubborn mourning bands was characterized by good citizenship and patriotism of all citizens who participated in it. It was an historic event for the city and the country, accounting for a voice of protest against the government for its delay in making urgent decisions.

We said then that the productive sectors of the coast would remain vigilant of the government‘s actions and we would not abandon our ideals. The fight was just beginning.

At our request, I called it "The seven coherences", but, unfortunately, I could not put Dollarization in them because other presidents of business associations did not accept my revolutionary idea. I had to acquiesce, for obvious reasons. However, I decided to keep the mourning band, which others took off after the march, until the big changes were made.

This black mourning band, which I wore for nine months, as though preparing, in the midst of mourning and pain, for the birth of a new and better life in my country, is today a symbol in Ecuador. After the declaration of Dollarization, I changed the mourning band for another just like it, which was not in black but was yellow, blue and red, the colors of the Ecuadorian flag. I kept it on my lapel until June 27, 2001, when I gave it to the President of the Republic, Gustavo Noboa, as a sign of faith that he would make the remaining reforms before handing over the presidency.

Noboa did not make the fundamental changes either and the country lost months as well as many opportunities.

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Chapter V § A surreal economy It was another argument that supported the need for dollarization: if dollarization didn’t occur, the country’s financial system could collapse.

For June 28 and 29, 1999, I convened the First Congress of the Small and Medium Industry of Guayaquil in the Hilton Colon Hotel. There, together with Franklin Lopez, a professor at the University of New Orleans and a member of the Economic Forum, in favor of dollarization and in the name of the Chamber of Small Industry of Guayas (CAPIG), I presented an integral economic plan (See Annex II), in which I once again explained in detail the agenda required to cure the crisis.

The foreign participants were Alvaro Vargas Llosa, a Peruvian writer and journalist, Gerardo Bongiovanni, president of the Freedom Foundation, from Argentina; Lawrence Harrison, a professor at Harvard University; Riña Sanchinelli, Philosophical Director of the Guatemalan Solidarity Union y Executive Director of the Interamerican Solidarity Council; José María Oscoz, Iberoamerican Director of the International Operations Department of Mondragon, Spain, y José Cordeiro, a Venezuelan economic analyst.

Naturally the main point of the meeting was dollarization. It was imperative to continue explaining and setting out the details of the path that had begun many years ago. Of course, it was necessary to maintain the criteria that granted a space for the exporters. The Economic Plan proposed that the dollar should have an exchange rate of 15,000 sucres to the North American currency, at the changing over of the system.

On September 21, in a debate-seminar organized by the CAPIG in the Hotel Hilton Colon, once again the dollarization of the economy, with its benefits and implications, was analyzed. Three international experts participated in the event: Martin Krause, an Economics professor at the University of Buenos Aires, Argentina; Carlos Leal, director of Economic programming for Azteca TV in México; and Alejandro Sucre, from Venezuela, who is a writer for the El Universal newspaper in Caracas, for The Wall Street Journal and for the Interamerican Economic Press Agency (AIPE).

At this time, the situation of the country was extremely serious. Some banks had already closed their doors and others were in the process of closing. That was another argument that pointed to the need for dollarization: if dollarization did not occur, the entire financial system of the country could collapse.

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§ Pressure and Distrust In order to slow down the dollar‘s climb, during the first trimester of 1999, the Central Bank placed resources from the International Monetary Reserve (IMR) in the Open Market Operations, to such an extent that between December 1998 and December 1999, it was reduced from 1,697 million dollars to 1,275 million dollars.

The measure didn‘t work. The price was being pushed up by the economic agents‘ distrust of the Government that did not apply an integral macro-economic program.

On February 12 of that fateful 1999, the Central Bank resolved to allow currency flotation, in order to prevent the bleeding out of the IMR to continue. The situation calmed down momentarily, but then, the pressure on the dollar reappeared. The instrument used to try to control the ―runaway horse‖ of the dollar was the interbank interest rate, which, in the framework of a surrealistically managed economy, rose to 200% on certain days in December 1999.

But the dollar continued to rise. The exchange rate, which had been S/. 6,592.90 at the end of 1998, rose to S/. 18,205.77 in December 1999 and in January 2000, it closed at S/. 24,761, although at certain times it was exchanged at 30,000 sucres.

As a consequence of the semi- paralyzation of the productive apparatus, the Gross Domestic Product (GDP) fell from US$ 23,255 million in 1998 to USD 16,674 million in 1999. In 2000, it barely reached US$ 15,934 million. Non-oil exports also fell from US$ 3,280.1 million in 1998 to US$ 2,484.2 million in 2000 in this period.

The official unemployment rate reached close to 20%.

Although by 1999, 70% of the Ecuadorian economy was already unofficially dollarized, there was little money in circulation and annual inflation was above 60%.

During that entire year, I set about delivering technical documents to the mass media so that the country would be informed and know the arguments on which I based my proposal for dollarization. In order to present my thesis, I also appealed to leaders of almost all of the political parties and to prestigious national and international economists.

December, as we know is sacred for Ecuadorians: it is the month of the family, friendship and affection. However, behind the caring gestures, feelings were repressed, exacerbated by the lack of work and money to buy even the most basic products. The reality of those moments showed that many people had not even been able to buy a single toy for their children. Conditions were ripe for a large scale social explosion. Pressure was accumulating.

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Looking back, in 1996, in spite of all of the political problems during the brief administration of ex-president Abdala Bucaram, people had been able to take home a bite of food for Christmas dinner. In 1997 and 1998, they were able to take some food home, but, in 1999, the only thing that the heads of households gathered were sorrows and sadness.

For these reasons, social pain was quite intense that December. When January arrived and people looked at the year ahead, the psychological impact of the reality of not having a job and not being able to acquire the most basic things, of being on the brink of dying of hunger, and of having family members who were sick and not having money to buy medicine, the situation reached intolerable limits. That was why I had the premonition to tell the super-minister of that time, Juan Falconi, that a ―turkey for the magi‖ was coming. Actually, it didn‘t happen on January 6, the day of the Magi, but on January 9.

To avoid being overthrown and because he was under pressure from the economic situation that was intolerable and definitely out of his control, on January 9, 2000, President Mahuad announced the implementation of dollarization.

Out of desperation, almost without believing in it, Mahuad made the decision, but he made it wrongly and hurriedly. After the announcement, no one touched the dollar, and as is now known, even the President himself was greatly affected. Only the members of the Economic Forum, who had untiringly promoted dollarization, weren‘t surprised.

From July to September 1999, for not having dollarized on time, the money making machine had been working incessantly, which had deteriorated the value of the currency even more, provoking, between November and December (just two months), a devaluation of almost 60%.

We must remember that at the beginning of November 1999, the exchange rate of the dollar was 16,248 sucres. And at the end of December and the beginning of January it reached almost 25,000 sucres. A person who was earning in dollars never before had had the opportunity to live for free, while those who were earning in sucres never before had felt such hunger as in those days. Salaries or wages in sucres were severely diminished and the purchasing power of the great majority of Ecuadorians disintegrated before our very eyes.

Several sectors unreservedly applauded the dollarization, while others harshly criticized it. For the first, the new system came to save the economy of the country and the purchasing power of the Ecuadorians. For the second, with the disappearance of the sucre as the symbol of national currency and the adopting of

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the dollar, Ecuador lost its sovereignty and voluntarily submitted to decisions framed by the United States.

Basically, the people who were opposed were from different currents: some resisted because the party was over for them, the money printing party. Others were opposed because the measure meant an end to earning in dollars and spending less every day with sucres which no longer had any value.

The reactions were obvious: dollarization was a blow for those who up until then had been living for free, for those who speculated with the currency and also for those who saw that it would affect their business of using their political power to favor strikes, protests and labor stoppages which would help to raise the dollar‘s value, making poverty grow and pressuring the governments in power.

For all of them, this was the end of an easy way of life with no ethics, justice or equality. This is the real reason for their antagonism towards dollarization.

Nevertheless, it must be pointed out that the measure, which was correct and necessary, but also unpopular with various sectors, was unable to save Mahuad‘s administration because other measures parallel to Dollarization were neither planned nor implemented..

After the announcement of dollarization, Mahuad breathed calmly, thinking that the immediate political problem had been solved. He didn‘t think it was necessary to continue with a program to modify the obsolete structures on which economic agents based their activities, or he didn‘t have time to do it.

Likewise, he didn‘t carry out measures to complement dollarization, particularly those related to fiscal discipline and stimulation of the productive sectors. The Ecuadorian‘s stomachs couldn‘t let the great changes that were still required by the national economy to continue being made drop by drop. The people can‘t be fooled, but at that time we were stupefied when we saw that the announcement of dollarization was incomplete, that it was a lie. That explains why a vacuum was created at that time which impelled indigenous and social groups to try to overthrow the government.

Once again, the people‘s sentiments were used and played with. The misery traffickers (a term coined by Alvaro Vargas Llosa in his book by the same name) played with the crisis to overthrow Mahuad using rhetoric and demagogy to justify and hide the true reasons for their actions.

As an example, something monstrous occurred: A referendum had been announced for January 23 on the issue of autonomies and the social groups that

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were involved in the disturbances didn‘t want that referendum to take place. That is why Mahuad was overthrown on January 21, two days before the referendum was to take place.

On the day following the government‘s announcement that the economy would be legally dollarized, I spoke on a television program in Guayaquil. I stated that although it was late, the government had adopted dollarization with an exchange rate of 25,000 sucres, which left a bittersweet taste. I explained that although the adoption of the dollar meant a positive change, it still bothered us that it had been done after so much delay and with the country in havoc.

My opinions pointed out the need for supporting dollarization: politicians, bureaucrats, private enterprise, the military, and the Church; we all had to push this cart.

My call to arms was not to defend the government, but to back up the decision to dollarize the economy because, finally, it was understood that we had to march towards the future and not go backwards. The window was beginning to open for the construction of a new country. Of course, it was a shame that the measure had been taken in this way, under pressure, by a government that was demoralized, corrupt and had no credibility. A good measure, taken at a bad time, made it a little more difficult to put it in place. But, at least, we were sure that it was better late than never.

§ A sabotaged and tortured implementation Once the announcement of the dollarization had been made, the Government did little or nothing to implement the necessary complementary measures that would have granted solidity to the new system.

On of the main errors at the time of dollarization was not allowing the value of the currency float, instead of establishing dollarization with a fixed exchange rate of 25,000 sucres. The value on the market had descended to between 13,000 and 15,000 sucres.

The President, in his last payment of favors to the bankers, favored them with one final devaluation and automatically raised the value of the dollar to 25,000 sucres, when the real value of the United States currency was 15,000 sucres. That was a gift of 10,000 sucres for each dollar. Once again the Ecuadorian people had to pay the bill.

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Prices were out of control, partly because the economic agents were recovering their losses for the crisis of the sucre, but also because of their blindness and entrepreneurial ambition. These facts made many people doubt the validity of the new system: people asked why everything was so expensive and the prices kept rising if the economy was dollarized.

The inflation with real prices was not due to the new economic scheme, but because at the time when we entered into dollarization, there was a tremendous incapacity for payment and generalized hunger, expressed by the crisis of almost 200%; this must be added to the customary rounding up of prices due to a lack of coins.

There is, among many, an example that is easy to understand: let‘s say that the basic income of an Ecuadorian in 1995 was US$ 120.00, but LP gas cost US$ 2.00. When the devaluation and other measures took place, the price of LP gas went down to US$ 1.00. Today the government buys tanks of LP gas for US$ 12.00 and sells them for US$ 2.00, a great business.

The devaluation had melted down the costs of certain products and of basic services in such a way that these values had really turned to dust. Logically, they had to recover costs.

With the devaluation, a taxi ride went down to 10 cents of a dollar, when, in 1998, it was US$ 1.50. That is to say, that until September 2000, Ecuador suffered deflation in dollars. I mean that, as a country, we were still trying to recover the levels of salaries and prices that had existed in the country in 1998.

On April 13, 2000, the government decreed the Ecuadorian Accounting Norms (NEC) No.17, which ordered all companies in the country to change their financial statements from sucres to dollars, through a regulation called Results from the Exposition to Inflation (REI) at an exchange rate of S/. 25,000 per dollar.

This regulation dictated the correction of assets, non monetary liabilities and patrimony with the inflation index from January to March of 2000, and such results had to be registered as losses or profits in the ―Statement of Losses and Profits‖ in the account named REI. Such calculations required previous adjustments from November 1, 1991, to December 31, 1999 (a period of eight years and one month), based on the indexes that were the result of the variation between inflation and the devaluation of the sucre with regard to the dollar.

In this context, it was logical to think about raising salaries so that people could face the rising of the repressed prices and to create economic transparency. At the

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time of dollarization, Mahuad had definitely committed a lot of abuses, but looking at it from a different angle, he returned the purchasing power of people‘s money to them.

That is why when dollarization took place, no one ran to withdraw their bank deposits. It wasn‘t a miracle, it was the perception that at last this property had been returned to the people and they were granted a long-term guarantee.

The International Monetary Fund (IMF) could not understand what was happening in Ecuador; they could not believe it, they had not even expected that it would happen that way, because for this international organization, when the Ecuadorian government decided to enter on the road to dollarization, people would massively withdraw their deposits.

That‘s not how it happened, which shows the lack of knowledge of 21st century economic concepts. In reality, when the people took refuge in the dollar, they did it because they did not believe in the local currency and they decided to change their short-term actions because they believed in the country in the long term. They decided to defend their savings and their patrimony in real terms.

This commentary about the IMF points out one of the serious problems for Latin America. Economy and psychology are twin sisters since, for example, domestic and foreign investment are easily scared away and if we analyze the situation of the Americas and what is happening in Argentina today, we can easily extrapolate a story that is similar in all of Latin America.

It is evident that Latin Americans took refuge in the dollar as a lifeboat. Since this is a natural reaction, governments have always wanted to stop this behavior and they have done so at such a high and unnecessary cost that it almost seems to be a whim.

The case of Brazil is a good example of the vulnerability of Latin American currencies. Before the initial triumph of reelected president, Inácio Lula Da Silva, the international and national markets reacted negatively when confronted with certain rumors and commentaries about his ideology. Massive withdrawals and purchases of dollars and other currencies occurred immediately, seriously affecting the local currency.

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§ A personal battle of ethics, justice and equality After the declaration of dollarization, I called a press conference. In front of all of the journalists, I removed the black mourning band that I had worn for nine months on my lapel.

I publicly announced that I wasn‘t going to throw it into the rubbish bin, and that I was going to store it with the hope that it would never again be necessary to wear it. I had done this because I believed that on the night of January 9, a democratic act favoring the people had taken place and that with this scheme, the currency‘s power had been returned to the people and the marathon towards prosperity was beginning.

I was sure that the government would take the rest of the measures that were lacking to enter on the road to sustainable development. Therefore, I stored that mourning band and in its place, wore a band with the Ecuadorian flag.

Then, right there, in front of the press, I pointed out that after the declaration of the dollarization of the economy, one had to ask what was going to happen to salaries.

I announced that I was going to give a raise of 50% to everyone who worked in my companies. I did this to try to balance in some way the saga of misery and increasing poverty they had suffered because of the devaluations. The press was unable to get out of its state of shock and the reporters almost fell over backwards.

As a consequence of these declarations, many business leaders called to complain and shocked, inquired, ―How could I have been so irresponsible as to make that public declaration‖. Actually, I had begun to pay my employees‘ salaries in dollars in January with a 50% raise.

To this criticism, I responded that the time had come to think like a first world country, that it was necessary to take the economy out the cemetery where it was stuck and to give people purchasing power. I knew that we all still had to pass on the bill for the repression of prices, which had not yet been normalized. I also trusted that businesses would assume the salary increases in the light of price adjustments and because future consumption would benefit them. The devaluation and the freeze had taken an enormous quantity of money away from the people and the least that could be done was to allow them to have the same purchasing power they had had in the past month of November. If this didn‘t happen, dollarization was going to be in vain, because the scheme wouldn‘t work. I also insisted that increased consumption was a win-win option, because the economy would become more dynamic, as in effect occurred in the following years.

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I saw how my action stimulated others to do the same. Two months later, I made another announcement of salary increases and this forced us to do something that wasn‘t logical, but it had to be done. Although it would cost us a lot, if we wanted prices to return to their 1998 levels, we also to raise income, salaries and wages close to their 1998 levels.

That is what allowed people to bear the leveling of real prices in many sectors of the economy in 2000. For the first time in the country‘s history, the minimum wage tripled in less that one year, something that could only happen with dollarization.

Although many things still did not reach 1998 values, we were on the right road; we had reached the intermediate goal. It was a difficult road we had to travel to recover hope, to grow again, to be 21 st century citizens.

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Chapter VI § The first results of dollarization in Ecuador Establishing a framework of legal certainty and being sure that there was no return were two fundamental conditions for the system’s success.

The application of an economic model upheld by dollarization, like the one begun in Ecuador on January 9, 2000, and totally implemented as of September of the same year, couldn‘t reactivate production by itself.

The system needed a series of complementary measures in order to reach this goal and become the axis of a society that respected rights, with efficient policies that would radically change the culture of underdevelopment that has existed in almost all of our republican life.

Dollarization achieved several objectives, principally the following: 1. Anchoring the exchange rate.

2. Slowing down the speculative factor in the price of goods and services.

3. Reducing the country‘s risk factor.

4. Gradually reducing the financial cost of money by freeing the business sector from uncertainty, and allowing it to plan its activities in the medium and long term.

5. . Introducing fiscal discipline.

6. Reducing the highest tax that has punished Ecuadorians for more that a quarter of a century: Inflation.

Nevertheless, other necessary measures that have not been resolved are: 

Establishing a general framework of legal certainty.



Eliminating monopolies, especially those that affect the development of communication systems and infrastructure necessary to modernize the country by improving competitiveness.



Establishing a radical culture of fiscal discipline and balance, including managing a zero-base budget.

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

Modernizing social security and especially the provisional system so that it contributes to economic development.

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Promoting an export culture, lowering the country cost, competing with the rules of the first world, under standards of greater economic freedom.

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Eliminating unnecessary paperwork and reducing administrative obstacles that affect the country cost.



Reestablishing appropriate credit lines for the country‘s economic reactivation.

Es importante analizar el impacto de la dolarización en los diferentes ámbitos del nacional: en lo económico, lo político, los mercados doméstico e internacional y lo turístico.

It is important to analyze the impact of dollarization on different areas of the national scene: economic, political, domestic and international markets and tourism. § On the economic scene Before adopting dollarization, all or almost all goods and services in the country were offered in relation to the dollar and although they were not paid for in that currency, but in local currency, they were tied to it.

If someone bought a house with a mortgage, the seller warned, ―This is the price, but it is tied to a specific exchange rate, so if the exchange rate rises, the payments will also rise.‖ The same occurred with all of the products on the market.

The economy was virtually dollarized, so the measure taken by Mahuad simply made the situation official. That is why I insisted in the ridiculousness of the new system‘s detractors, who were surely defending the obscure interests of the circles of power who were accustomed to an easy life and the privileges of an elite that was divorced from the reality of poverty in Ecuador.

Let‘s recall an example: a brilliant doctor in Guayaquil, who had dared to buy a house, something he had the right to do, planned to pay for it with a five year loan.

Then he calculated and thought that if 6 million sucres per month was a thousand dollars a month, he could pay that amount and he bought the house.

What this doctor never imagined was that in a few months, his income would disintegrate. Why? Because he was paying for the house based on the dollar, but his clients were using sucres and therefore, he received his income in devalued sucres.

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The clients had and paid with sucres that were worth less every day. For this doctor, his expenses were rising because the dollar was rising and his income was diminishing because his clients, in turn, couldn‘t raise their own income and therefore were unable to pay more.

In those days, a doctor in Guayaquil charged the equivalent of 30 dollars for a visit, but when the devaluation and the crisis occurred, those 30 dollars turned into only five dollars.

However, his debt continued to be 1,000 dollars per month, which had become 25 million sucres, a total imbalance. No matter how much this doctor increased his working hours, he couldn‘t manage to cover his expenses.

Many professionals from all walks of life were forced to give up their houses. This is what is called mismatching: on the one hand, expenses rose because they were in relation to the dollar, but on the other hand, income fell because the value of the national currency was melting away; it had deteriorated to such unbearable levels that it had almost disappeared.

Then, what had to be done? Make these two variables (income and expenses) walk together with a strong currency. This meant converting income to dollars and making official the dollarization that already unofficially existed and exists in almost all of Latin America. § A reflection Here I‘ll stop for a personal reflection: perhaps I am the first person in Latin America who proposed the implantation of a new monetary scheme, dollarization, in 1998.

There were two years of intense struggle until finally a miracle occurred: exPresident Mahuad listened and decided to wager everything on dollarization and changed the course of the country by 180 degrees.

Unfortunately, this decision was taken too late, after a macro-devaluation, which left, as a consequence, unmanageable prices and, because neither the measure nor the corrective decisions were implemented immediately, unleashed the fall of President Mahuad.

In September 1998 we proposed that the economic authorities should carry out dollarization with an exchange rate of 7,000 sucres per dollar, since the exchange rate of the American currency was 6,480 sucres.

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Afterwards, we proposed an exchange rate of 10,000 sucres when the exchange rate was at 7,793 sucres; then 12,500 sucres when the currency closed at 11,000 in March 1999; later 15,000 sucres when the exchange rate fluctuated at around 13,000 sucres; and finally we asked that dollarization take place with an exchange rate of 25,000 sucres when, at the end of 1999, the currency closed at 17,000 sucres.

The International Monetary Reserve (IMR) calculated that the cash required for dollarization in September 1998 was 371 million dollars, in June 1999, 463 million dollars were required and when it was finally carried out, 520 million dollars were required. Thus the medium of exchange (Mi) grew from 6 to thirteen trillion sucres, causing the devaluation of the currency and an inflationary process. § But... inflation continued People complained that dollarization had not eliminated inflation from one day to the next, but this was in advertising spots put out by those citizens who believed in ―Ecuador‘s no‖ and who still exist in the country, those who had lost a good percentage of their power. It can be seen that the inflation in 2000 and part of 2001 was due to two things which must be reiterated: First, Ecuador was suffering from repressed prices, in part because of Mahuad‘s last gift to the bankers, and in part due to the fact that, in 1999, this president sent the economy to the cemetery. Because of the freeze, that economic motto that prices are not determined by the cost but by the market was fulfilled. Almost all of the entrepreneurs in the agricultural sector had lost their patrimony due to the fact that consumers were unable to pay the true cost of the products; these were far below the equilibrium price.

Second, because the National Institute of Statistics and Census (INEC) mixed the measurements in sucres with those in dollars; this was an incredible error, but it happened. If we take the year 1998 as a base and compare it with the year 2000 using, of course, the rates of exchange in effect at each of those respective times, we will notice that there was deflation. The comparison should be dollars to dollars.

Our sense of responsibility caused us to try to alert the country about this tremendous incongruity which deflected a true appreciation of the results of dollarization.

It was evident from the beginning that there would be difficulties. Many sectors would feel the weight of a measure such as dollarization, especially certain exporters who were accustomed to speculating with the devaluations.

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From the year 2000 on, they had to export based on their efficiency, because globalization demands efficiency. And all of this happened because the time had come for Ecuadorians to abandon the practice of producing only primary goods, since that generates misery.

A country whose exports are apparently competitive as a result of the effect of exchange rates, which are based on devaluations, really exports misery. This country was exchanging the incapacity of its population to pay for the buyers‘ capacity to pay in the destination markets.

What should we do? Look for possibilities for exporting added value. Let‘s look at an example: Ecuador is already exporting great quantities of organic bananas, which at present can produce double the price per box compared to traditional bananas. Why do organic bananas receive higher prices? Because people don‘t want to become contaminated with the excess of chemicals and they look for other alternatives, because everything ecological is in style.

Nevertheless, it is no less certain that there is a parallel agenda that is pending and which has impeded additional results that would improve the common citizen‘s quality of life even more. Measures such as lowering tariffs, simplification of public bureaucratic paperwork, de-regulating the fiscal monopolies and, of course, demanding that the political class offer us calm and stability in the daily life of the democratic institutions, with no shocks or events that go against the constitution.

And in the present administration, which began in January 2007, we specifically demand fiscal discipline.

We must always remember that the countries of the first world, to which we aspire to arrive and belong, also have to face different variables in order to defend a growing economy, an economy, to which its currency offers stability, more than anything else.

However, we are talking of an economy in which there are also other parallel or complementary measures that are crucially important and are the motive of politics, processes and untiring discussions. § On the political scene Many people thought that dollarization would achieve everything, but it is only the strait jacket that forces us to do what we have to do.

Because of dollarization, which was recently implanted, we were able to surmount various political events, which under other conditions would have easily provoked a social explosion in the country:

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1. In August 2000, the National Congress offered one of its usual shows, which put democracy at risk, when the Social Christian Party chose Congressman Xavier Neira for the presidency of the Congress and, nevertheless, the opposition groups didn‘t allow it.

2. The Government wanted to implement some economic measures beginning on January 1, 2001, measures such as a 30% increase in fuel costs, the removal of the subsidy for domestic and commercial LP gas, raising the price from US$ 1.50 to five dollars, increasing the VAT from 12 to 15%, and the alternative presented by the Congress permitting companies and citizens to choose between Private Social Security and Government Social Security. Totally against these measures, different social and union movements maintained an attitude of protest. With violent proportions, this massive protest was intensified when it was joined by a national strike by the indigenous people with highway blockages, which was prolonged from January 22 until February 8, the date when the uprising ended only after several people were wounded or killed on both sides: the indigenous people as well as the government forces.

3. A few years later, a leader of the uprising that had overthrown Mahuad became a victim of his own recipe.

In both cases, if the country hadn‘t been dollarized, the exchange rate would have possible reached figures of over a million sucres and the banks would have failed.

The entire financial system would have collapsed, the same as the productive sector.

Today, these acts no longer have the same importance nor the disastrous effects on the economy because people continue working, and they continue to be dedicated to their businesses. In conclusion, many businesses have been saved and with them, many families.

We mustn‘t lose sight of the incidence economics have in political relations of the people and vice versa.

More than twenty-five years ago, Ecuador made the decision to live in democracy, we decided that democracy was what was best for us and what would best serve our development.

Since then, various governments have followed one after another and economic problems have been the cause that has put the stability of democracy at risk on different occasions.

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Many people sustain that a better distribution of wealth is achieved through taxes. I don‘t agree with that thesis because when there is a greater quantity of taxes or a higher tributary cost, the result is less economic activity.

On the other hand, I do believe that dollarization has managed to bring about an incredible redistribution of wealth, since the primary beneficiaries have been those Ecuadorians who live from tips. Before this, people gave the equivalent of four cents of the dollar as a tip, but with dollarization this immediately increased until it may even reach one dollar.

This means that a person who watches a car outside of a club or a restaurant receives an average of a dollar as a tip; that means that he has gone from earning 1,000 sucres (four cents of a dollar) or 2,000 sucres (eight cents of a dollar) to earning 25,000 sucres (1 dollar).

However, the most important thing is that people in the areas of technical and vocational services, known in English as handymen, have received the most benefits in their economies: carpenters, plumbers, electricians, stonemasons, manual workers, artisans, those who are handy at painting, lacquering, or in making distinct and special things. You can be sure that those who put the most added value into their services or products are those who earn the most.

Before dollarization, a plumber earned four dollars for a job, while for the same job he earns twenty dollars today. There are other examples, like the case of the taxi drivers, which makes us recall the episode of the doctors who before the great devaluation in 1998, charged the equivalent of US$ 30 for a visit and in 1999, after the great devaluation, were earning the equivalent of 6 dollars.

With this income, how could they pay their dollarized debts for cars, houses, equipment and offices? The taxi drivers and transportation companies paid for replacement parts and tires in dollars, they paid for gas in prices adjusted to the dollar, and still, they received sucres without being able to aggressively raise their prices because people were unable to pay more.

So, when I hear someone say, ―Wow! Carpenters sure charge a lot nowadays‖, I say, ―Thank God‖, because that is one of the advantages of dollarization; it shifts money to the people who were badly paid before. Standing around in malls and restaurants in Quito or Guayaquil would be sufficient to notice which people are the ones consuming and buying. Consumption has definitely become more democratic, without losing sight of the fact that there is still a long way to go.

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§ In trade relations Thanks to dollarization, countries, which didn‘t even have commercial offices in Ecuador, now open their offices in search of opportunities. Chile and Peru, for example, have intensified their search of relations and business dealings with Ecuador.

Likewise, there are cases of investors from other countries who are testing out the opportunities in Ecuador in areas such as hotels, electricity, highways, and telephone communications. That is to say, areas that are not speculative, but productive.

But, it is true that we have to open our eyes wide because there are already other countries, such as El Salvador, that have entered into the system of dollarization and are competing with us. That is why we must demand the rapid execution of the rest of the remaining tasks in order to reach better development and enjoy those benefits that we could lose if we don‘t do what should be done.

What is the common denominator of Latin America, except countries like Brazil and Chile? In general, there is massive exporting of products that have almost no added value, that is to say, those called commodities, basic or primary goods.

By exporting our technology, we are the ones who set the prices in the market, By exporting primary products, the prices are set by the market.

When there is more production, prices are lower, and therefore, those outside the country have the frying pan by the handle rather than us. Unfortunately, the political leaders have forgotten about the ―common good‖, of achieving wellbeing, of serving the people, of setting the National Agenda of Competitiveness in motion. § In tourism We have gotten used to believing that Ecuador is not a tourist destination, but that is false. What was happening was that people didn‘t trust a country where the rules of the game were unclear and where political and economic instability were evident.

Today we watch astounded at the fact that international cruise lines arrive in Manta, as well as to Guayaquil and Salinas, and this is becoming more frequent.

Why? Because these cruise lines bring passengers, especially the elderly and retired people who flee from the harsh winters of their countries, looking for the sun.

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These tourists enjoy traveling on a cruise ship because they have the time to spend, and they want to avoid the bother of changing planes or hotels, so they turn the ship into their home. But the population group that spends its resources on traveling and tourism wants peace and stability during their travels.

We are also the center of attention for those who want to do ecological tourism, since we have some of the richest fauna and flora in the universe. The countries that want to be their destinations must have stability and legal and economic certainty.

With dollarization, Ecuador could be a tempting destination if we are able to reconstruct strong legal certainty, eliminate monopolies and increase economic freedom.

And speaking of adding value, doesn‘t it seem to you that in Ecuador as well as in other countries, we should to learn that added value also means treating people well. We have already been left behind in the culture of a society that produces high quality services, especially in tourism. If a visitor comes to Ecuador and in some way is mistreated, he won‘t return and he will be sure to spread that bad news to everyone he knows. We must change the culture of service. § The road to the goal It is true that dollarization helped to make changes come about. One proof of this is what has happened in cellular phone service, which has been opened to competition; in the potable water and sewage systems of Guayaquil, which have already been privatized; in highways, which in 2000 and 2001 have stepped on the accelerator towards reconstruction and construction.

Nevertheless, it is also true that there is still a lot left to be done in Ecuador. One pathetic case is that of the electric sector, with which we were at the doorstep of eliminating that monopoly, but people interested in maintaining it are extremely strong and once again, we go back to page one.

With dollarization, people have become more involved in accountability. They demand more and they notice more easily where decadence can be found, where the plugs that have to be eliminated are; they make more comparisons with the first world, and this is positively causing a cultural revolution That is why certain sectors are interested in eliminating it.

People say, ―I want to earn as if I were in New York,‖ to which I answer, ―That would be incredible. I wish that were so, but the moment you begin to earn as if

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you were in New York, you‘ll have to work as if you were in New York and you‘ll spend as if you were in New York. That‘s what it‘s all about.‖ The dollarization of the economy formed the basis of support to allow the establishment of Government policies to stimulate the growth level of our battered economy in the long term. In order for dollarization to be an instrument that gives us wellbeing, it must be complemented with an economic plan to correct the distortions of former years.

That is why it is imperative to reactivate the productive sectors by building efficiency and added value through the solid competitiveness that is vital for globalization. It is imperative to reestablish trust and the purchasing power of workers‘ salaries, creating a favorable climate so that together – rulers, businessmen and workers – we can build a new Ecuador.

What is the first thing that should be done? Immediately return the purchasing power of the Ecuadorian people to at least the level of 1998, and revise the salaries and wages so that the signs of demand will return to the market.

It is necessary to understand that the monstrous devaluation that we suffered in a single year, when, in January 1999, the exchange rate for the dollar was around S/.

7,245; in November, it was above S/. 17,000; and in January 2000, it had reached S/. 25,000. This meant that in only a couple of months the currency had been devalued in more than 100%. As a consequence of that, people ‗s working capital was reduced by 50% or more. This meant that if an importer used to import 100 units, he could no longer do that, he was only able to import 50 or less. If someone produced 100 units, that same person could now produce only 50.

Then, what was the first thing that had to be done? Give new loans through the development banks or from lines of long term financial products to supplement this initial difference and be able to produce or import the same quantity of units as before the devaluation massacre at the end of 1999.

This was not done and production was reduced by 50%. At the same time, demand accelerated because salaries had been raised. Although all my life I have maintained that salary increases cannot be made with no basis, by decree, that they have to be made based on an increase in productivity, it was clear that in January 2001, it was necessary to raise salaries and wages after the grotesque loss of more than 50% of the real purchasing power caused by the devaluation.

Simultaneously, we had to revise our customs; eating products that were in season, for example, was a strategy to avoid increasing expenses in the household

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budget: ingeniousness, creativity, and saving without lacking anything, that was the point.

One of my concerns when dollarization was in the gestation process was how to make basic services reach their real prices; some have been brought up to date while others, such as LP gas are bleeding the national budget.

The same thing happens with the costs of electricity, telephone service, potable water, etc. In order to achieve the opening up of these services, it was necessary to raise the prices and the population had to absorb them, when we knew that income did not increase with the same speed as was needed.

In one year and five months (the middle of 2001) the prices of the basic services were updated to their real market costs and the telecommunications sector was able to open up to competition. That is why there were many companies interested in investing in the area of electricity and other services.

The miracle of dollarization made the difference in prices as well as the difference in income be absorbed because, as I stated earlier, taking the year 1998 as the base, the minimum wage was 150 dollars, but when Mr. Mahuad made the declaration of dollarization, this minimum wage became 40 dollars.

At the end of 2001, after ten years and thee months of management, I resigned from the CAPIG in order to dedicate that time to the Interamerican Business Federation (IBF).

From there I continued my struggle for the revolution of ideas. After an exhaustive study called, ―Comparative Analysis of Country-Cost‖, prepared in 2003 and which can be found in this book, I began to push for a 20% raise in workers‘ income, but based on increasing the work week from 40 to 48 hours to avoid inflation and to be the same as other countries in the Andean market.

From the IBF we also promoted work by the hour and tried to set a minimum hourly wage, as there is, for example, in the United States.

In order to achieve this, we had to push labor flexibility, because Ecuador was prepared to import the rules of the first world, that our youth try to find abroad, but, obviously, we needed to diminish, to unknot the laws which had been tangled by corrupt politicians and public officials in order to obtain great power as a result of their discretionary powers and lack of accountability.

There is no doubt that the economy had to be straightened out: reality was different from what the norms wanted to establish. Politicians avoided opening their eyes

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because they preferred to maintain the discretionary powers that they received by controlling the government.

Our strengths to start on the road to prosperity were, above all, the youth, who constituted 70% of the population, with a potential that compensated their lack of a good education.

As an example, I cite the fact that our people had to use two currencies without any previous training and only helped out by the inventiveness of Wladimir Coello, who creatively invented the ―Little Coello Table‖ which converted sucres to dollars and viceversa, and who set up a sales network in buses and other public places.

Another great strength of ours for development consisted of a hard currency: the dollar is one of the strongest currencies in the world and it circulated in the country that was our principal commercial partner.

A third strength is that we are geographically in the center of the world. So our opportunities reside in that we can do everything: tourism, mining, agro-industry, and forestry development.

Now in Ecuador, we must play fairly. Exporters must add value to their products and that is beginning to happen: we have begun to see farms qualified as organic, we have seen businessmen, who far from copying a brand, now have their own brand and they are doing well. The challenge is to play fairly and use the rules of the first world.

Ecuador is a country of investment opportunities. Ecuador is a country that has gone from having zero credibility in the long and short term to, since 2003, recovering confidence in the long term and therefore, hope.

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Chapter VII § The marathon of prosperity Fiscal policies should become Government policies. In that way, every President who comes to power would have to bring the economy forward...

We have passed the first thirty miles of the marathon of prosperity. However, we are going very slowly due to the weaknesses manufactured by the militants of ―the no‖, who don‘t want to lose power.

We still have to take some essential steps to surmount the lack of legal certainty and the legal tangle that raises the cost of transactions. We are still mired in the total elimination of state monopolies.

In spite of the Fiscal Transparency (2002), which is very positive, it is necessary to go farther and incorporate a zero-base budget and add a revolutionary norm: that the budget cannot exceed 35R% of the GDP. Based on these changes, fiscal policy will become Government policy and every President who comes to power will have to bring the economy forward in order for that 25% to be substantial.

This strategy means that the governments would have to carry out their work through development and not through the misery that is provoked by a budget based on passing the bill to the people via high taxes.

A budget should be balanced through prosperity, that is, intense economic activity, which means having future perspectives, being competitive and joining the first world.

As I asserted in an interview that I gave to the prestigious North American newspaper, The Wall Street Journal, at the end of 2001, no one can question the positive turn of affairs given by dollarization; it even brought about greater participation of women, in private economic activity as well as in public activities.

Thus, with dollarization we have walked the first thirty miles of the marathon towards prosperity, remembering that these are the most difficult ones. How were these thirty miles completed? First, with the battle for dollarization. Second, with the restructuring of the external debt. Third, with the construction of the new oil pipeline.

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These three goals should have been reached in two or three months after Gustavo Noboa ratified dollarization at dawn on January 22, 2000, when he assumed the presidency. Nevertheless it was only in March 2001 that the contract for the construction of the new oil pipeline was signed. That is to say that what should have been done in one month was done in one year; perhaps there is the consolation that it‘s better late than never.

The second thirty miles on our road to progress, perhaps as difficult as the first, will have to be attained through the elimination of public and private monopolies: among them, ending the monopoly of pension funds, of the telecommunications sector and of the electric companies.

With the ending of monopolies comes the opening up of the stock market, comes better health attention for people and above all, comes the time when people have the capacity to choose between various options. Therefore, the slogan should be an end to all kinds of monopolies, among them, that of the Ecuadorian Social Security Institute (IESS).

This path is perhaps the most difficult one because those sectors are where the golden bureaucracy is, the ones that enjoy absolute power, discretionary powers, and zero accountability. These are the characteristics of a corrupt system that allows them to obtain a large income through incorrect means.

The power of those sectors and the political fragility of the government of expresident Gustavo Noboa, who was unable to break the chains imposed on him and the attacks of ―Ecuador‘s no‖, has been such that, two years after the implementation of dollarization, many of the reforms continue to be pending in spite of the fact that the majority of the country is already conscious of the need to eliminate the asphyxiating monopolies.

The implementation of an International Financial Center is urgent, fundamental for the country, because when it exists, the national bank will not go through problems or be in dire straits such as those that were provoked by the 1999 crisis. When they have no liquidity or money, the international banks pump money into the national bank and when there is an excess of local money, they place their liquidity abroad.

It is easy to understand that this would allow compliance with the Basil norms to be strengthened, which would give safety to the savers.

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Another important issue: establishing clear unmovable rules, for at least a period of 15 years. That is to say, giving a guarantee to productive investment so that the investor can plan his work without fearing shocks or disagreeable surprises.

Countries today are showcases where each one shows off his good points.

Therefore, attracting investments requires that we offer a country with an appropriate environment that competes with what other countries offer.

The Ministry of Foreign Trade should be changed into the Ministry of Competitiveness, so that it can work on the elimination of barriers that impede exportable Ecuadorian products from being placed on the international market due to a series of bureaucratic obstacles.

Being competitive is attained by training the businessman and the workers, teaching them to reach international standards and supporting them to promote those products in foreign markets. This task has been entrusted to the CORPEI (Corporation for the Promotion of Exports and Investments) in Ecuador, ProChile in Chile, and ProExpo in Columbia.

In the case of Ecuador, this mission could be complemented with a change in the structure of the Foreign Relations Office, revising the functions of the ambassadors so that they are salesmen and negotiators of the country, who capture opportunities for the country. The promotion of trade and investments has to be, in reality, a government policy, a topic of national priority. The environment must change. Institutions such as CORPEI must be supported and strengthened to broaden the base of their work in favor of trade promotion.

There are certain principles that should be considered as government policy and that is why I assert the need to revise many things: as I have already stated, the general government budget should be based on the GDP, and there has to be a limit in the field of expenses. That is to say, an expense ceiling that is no greater than 20%, starting from a zero base budget, ensuring that the percentages are maintained through time and that their variation is due only and exclusively to growth of the GDP and not to demagogy of one government or another.

Then, pre-assignments have to be established based on percentages, rather than on fixed quantities. In this way, all of the country, embarked on the same theme of promoting production, will make Ecuador function and it won‘t be the sinecure of one or two groups that provoke damage to the budget, which affects everyone. The distribution of the budget should be automatic, using mathematical formulas, to avoid political manipulation in the assignments.

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With the proposed measures, the size of the state would be reduced and also the fiscal budget. And using good criteria, imagination and reengineering, the payment of the external debt could be negotiated in exchange for being given concessions or some other type of arrangement which would give the operation of services and infrastructure to the creditors, as has already been done in other countries on this continent and in the world. The remainder has to be done by all Ecuadorians, especially businesses, businessmen and women, workers and universities.

These were the principal tasks that the government should have undertaken immediately after the dollarization, but it didn‘t.

After Noboa came Lucio Gutierrez‘ turn, but there were still no changes.

After the coup d‘etat against Gutierrez, the government of his vice president, Alfredo Palacio, didn‘t make the situation any better. Economic freedom and the structure of a regime in line with the law actually went backwards.

Now, in spite of the fact that President Rafael Correa promised to respect dollarization during his administration, there is nervousness in the productive sectors, although I think it should be present in the entire population.

Correa speaks of repressive planning with respect to investment, he puts the respect of private property in doubt, he announces tariffs on the expatriation of capital, he foresees increases in income taxes, and he warns that there will be control of bank loans and similar measures. However, it is one thing to talk and another thing to act. Time will tell.

Recapitulating the recent story of how our history has unfolded and how people have had an effect on it, 2002 was a political-election year.

For that reason, I convened a forum of 900 people that took place on August 26, 2002, in the Hotel Hilton Colon to present the ―Commitment Agenda for the Development of Democracy 2002-2015‖, which was later presented to the Ecuadorian presidential candidates; its objective was that the winner would carry it out and the losers wouldn‘t oppose it.

Among the participants were Mauricio Yépez, President of the Board of the Central Bank of Ecuador; Cesar Montufar, President of Citizen‘s Participation; and Paul Granda, a university professor from Cuenca. All of the attendees approved of the agenda and the forum was transmitted on television.

On September 16 of the same year, we invited the candidates for the Presidency of the Republic, an event that was also transmitted on television. The majority of

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the candidates were there: Ivonne Baki, Lucio Gutierrez, Osvaldo Hurtado, Xavier Neira and Leon Roldos.

Lucio Gutierrez, who later won the election, attended the second forum organized by the IBF and the IWF. There he made statements in favor of the general outline proposed in the Commitment Agenda for the Development of Democracy 20022015.

During 2003, nothing major occurred, but it is worthwhile to look over three situations: What happened to the cost of living index in May 2003, as compared to 1998, 1997 and what was its implication in income? What happened to the GDP versus the General Government Budget? What was the evolution of prices comparing May 1998 to May 2003? The cost of living index had gone down with dollarization and the minimum wage had also improved.

The hope of building a more just and progressive Ecuador became stronger at the same time as there were continually fewer citizens who doubted dollarization.

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Chapter VIII § Politically bored countries are happy What is important to the country is what each citizen prefers on the highway of its economy.

When we drive on a first class highway, which is straight with no potholes, the road can be somewhat boring in contrast to the abrading bustle of a side road in terrible condition, but you don‘t have to ask any driver or car owner or passenger which he prefers.

In the same way, an economy that runs with no shocks, anguish or insecurity, could be boring for analysts and econometrists. But, what does each citizen prefer on the highway of the economy.

From the beginning of his administration, Colonel Lucio Gutierrez had cometo power as though kidnapped by various sectors that had placed him there and they let him do very little.

That is why I continue to insist that, in spite of the political crises, with dollarization great changes are possible without anyone being upset.

In spite of continuing as the head of the IBF, in January 2004, I accepted the position to preside, ad honorem, the National Council of Competitiveness (NCC), a technical institution.

Gutierrez asked me to try to help at least with part of the changes that needed to be made in the field of oil, competitiveness and reforms to eliminate the electric, telephone and social security monopolies, among others.

Although the council is not an executor and is only a facilitator, with my presence, I wanted to accelerate structural changes.

To do that, on November 17 of that year, I convened the country‘s prefects and mayors in Guayaquil to present the 22 point project, that is, the project of the changes that the regional authorities were committed to carrying out and to support the need for eliminating the electric, telephone and social security monopolies, among others, to allow competition.

I tried to make changes, but there was very little I could as a result of the absenteeism and the lack of collaboration of a high percentage of the business

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leaders, each in their own little space; the ―complaint meter‖ was running at full speed, and only a few were participating and many were absent.

The situation became more complicated in December 2004 because of substantial mistakes made by President Gutierrez.

The political crisis erupted due to fighting between the political groups: the PRE and the PRIAN against the PSC and the ID. The PSC and the ID had decided some time ago to remove Gutierrez from Carondelet (the presidential palace) and he was forced to form an alliance with the other opposing group (the PRE and the PRIAN).

In order to save him, they took down the Justice Court, which was acting at that time and had been unconstitutionally named in 1997. A sort of Kosovo took place.

In the meantime, I was editing my Statement of Accounts from the year. I had been managing the NCC, since as my civic duty, I had my commitment to last at least a year and I planned to give it up on January 18, 2005, during the event called ―Ecuador 2005-2025, through competitive provincial and cantonal networks‖, which was convened in Quito. After that event and once I had delivered my work and my Statement of Accounts (that document can be seen on the website or requested electronically), I presented my resignation and I left. I don‘t regret participating because, on the one hand, I could verify that the Ecuadorian system of government had collapsed, and on the other hand, the necessary strategy was to attack from the provinces.

I aim and have always aimed at the provinces, at the 219 cantons or municipalities.

I aimed for the unity among the 219 mayors, 22 prefects, the universities, the workers and the acting governments; I aimed to revolutionize an obsolete system of government. And I will continue to do it even if things become difficult. It is my every day challenge. § A shield for the political crisis I believe that my contribution was important on the electrical issue and also in promoting those 22 points, in which I believed and I hoped that the prefects as well as the mayors had realized that they were the ones who had to produce the revolution of change.

In this account, which is nothing more than the story of the revolution of change, it must be emphasized that another benefit of dollarization is that it shields the economy against political crises.

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All of 2004 was spattered with constant political crises as a result of the President and the political sector‘s mismanagement, but also as a result of the satanic actions of their opponents; however, the economy grew.

The greatest proof of this is that during March and April, 2005, in the middle of a political crisis, where once again the opposition unconstitutionally removed President Gutierrez (April 20), the sales for both months were 50% higher that those of March-April 2004.

This gives us the guideline to confirm that Ecuador, beset by Machiavellian bands of political players, who were interested in nothing more than their personal gain, could be great. Ecuador is not a poor country. On the contrary, it is a country that has been made poor. The poor practices of the oil sector, taking 1994 as the baseline, show us that these practices still continue and that because of them, up until 2006, Ecuador has failed to receive US$ 16,951,174,120, as you can see below: Production (barrels per year)

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006*

119,751,000 113,640,000 112,006,000 106,701,000 101,401,000 89,543,000 85,047,000 82,929,000 80,775,000 74,614,000 71,948,000 70,972,000 69,372,000 TOTAL

AVERAGE PRODUCTION PRICE (US$) DIFF. (Barrels per year)

13.59 14.81 18.26 15.80 9.94 15.52 25.07 18.36 21.58 26.43 32.17 41.01 43.34

0 -6,111,000 -7,745,000 -13,050,000 -18,350,000 -30,208,000 -34,704,000 -36,822,000 -38.976.000 -45.137.000 -47.803.000 -48.779.000 -50.379.000 -327,685,000

LOSSES FROM DECREASE IN PRODUCTION (U.S. $)

$0 - $ 90,503,910 - $ 141,423,700 - $ 206,190,000 - $ 182,399,000 - $ 468,828,160 - $ 870,029,280 - $ 676,051,920 - $ 841,102,080 - $ 1,192,970,910 - $ 1,537,822,510 - $ 2,000,426,790 - $ 2,183,425,860 -$ 10,391,174,120

Source: Petroecuador Produced by: American Business Federation (FIE)

LOSSES CAUSED BY OIL INDUSTRY INEFFICIENCY 

U.S. $ 10,391,174,120 in lost production, added to at least the following information:



U.S. $ 860 million annual losses from first starting the OCP operation in 2003. (Source: World Bank), plus

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

U.S. $ 3,000 million loss a year (2003, 2004 and 2005) for costs mean the old and outdated refineries. (Source: World Bank), plus



U.S. $ 2,700 million loss per year (2003, 2004 and 2005) for the theft of fuel in the OCL. (Source: World Bank). So the minimum loss due to inefficiencies in the last eleven years has been:



Lost income: U.S. $ 16,951,174,120

1993 1994 1995 1996 Public Production (Thousands 117,896 119,751 113,640 112,006 of barrels) Private Production (Thousands 7,544 18,461 27,513 28,471 of barrels) 1997

1998

1999

2000

Public Production (Thousands of 106,701 101,401 89,543 85,047 barrels) Private Production (Thousands of 35,007 35,678 46,748 61,162 barrels)

2001 2002 2003 Public Production 82,929 80,775 74,514 (Thousands of barrels) Private 65,817 62,498 77,983 Production (Thousands of barrels) Produced by: American Business Federation (FIE)

2004 71,948

2005 70,972

120,368

123,200

We can also see in the upper and lower tables that private production has increased; however, state production has decreased significantly.

Government inefficiency If we analyze the GDP versus the total expenditure with Dollarization, which is reflected in the table below, the Government Budget has increased from U.S. $ 3,889 million in the year 2000 to 8,564 million in 2006 and it will be at around 11,000 million in 2007, that is 182% more. However, education as well as health is becoming increasingly disastrous because they are being siphoned away, which leads to the obvious conclusion that this is not so much about the quantity of

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spending as the quality of spending. As you can see in this same table, the annual income per person (GDP per capita in U.S. dollars) has increased by 92.2%, that is from U.S. $ 1,296 in 2000 to USD $ 2,491 in 2005 (See table below).

ECUADOR: GDP vs TOTAL EXPENDITURE

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

ANNUAL GROSS INCOME PER DOMESTIC PERSON (GDP PRODUCT * per capita in U.S. $) 1,561 11,895 1,786 13,968 1,620 13,188 1,345 11,183 1,339 11,381 1,362 11,835 1,161 10,305 1,003 9,095 981 9,094 1,005 9,523 1,067 10,351 1,146 11,343 1,187 11,991 1,461 15,057 1,660 18,573 1,772 20,196 1,835 21,268 2,008 23,636 1,946 23,255 1,376 16,674

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GOVERNMENT BUDGET

4,783 5,321 3,673 2,766 2,796 3,085 3,130 2,966 2,445 2,658 2,822 3,020 3,319 3,455 3,952 4,804 5,221 5,220 5,145 4,165

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ANNUAL GROSS INCOME PER DOMESTIC PERSON (GDP PRODUCT * per capita in U.S. $) 2000 1,296 15,934 2001 1,703 21,024 2002 1,967 24,,512 2003 2,230 28,636 2004 2,505 32,636 2005** 2,761 36,489 2006** 3,050 40,892 2007** 3,229 43,936

GOVERNMENT BUDGET *

3,889 4,852 6,117 6,585 6,951 7,344 8,564 9,766

* In millions of dollars ** In the case of the GDP and the annual per capita income, data for 2005 are provisional and 2006 and 2007 are estimates.

Source: Government Budget. Banco Central del Ecuador.

But there is something even more shocking that I offer to readers: the table that I drew up entitled "26 years: The Itch of Ecuadorian Democracy", which presents figures that show that Dollarization improved the standard of living. The figures of the period show that the dollarized economy grow from a GDP of U.S. $ 15,934 million to U.S. $ 31,141 million, an increase of 95.4%; inflation fell from 150% (in the days before Dollarization) to 1.39% in March 2005 (annualized), which was lower than in the United States and Europe. In short, today I can say that it is not taxes that redistribute income, but Dollarization! (See Table "26 years: The Itch of Ecuadorian Democracy".

I also close these pages with a prominent concern, because some people who belong to the group of "Ecuador‘s no" have taken over the country. However, rather than to promote it to be the best in the twenty-first century, using the speed of a bullet train for major reforms that have not been made, they want to go backwards and be involved in fatal adventures that will make this country explode.

That is to say, they have begun to give us arsenic disguised as Coca Cola. Many of them have been enemies of Dollarization since it took power away from them.

They could no longer harm the economy with strikes and burning tires; they were not consulted on the value of the dollar for financial speculators and they could not bear the fact that macroeconomic figures were improving, when this went against their interests. They couldn‘t bear monetary stability, because they used to have more income by earning in dollars, since the devaluations didn‘t empty their pockets but rather their neighbors‘; and because instead of becoming competitive they preferred to prey on concepts to return to the 1999 Carnival using double-talk; they used to criticize devaluations, now they love them and want them back.

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Why my concern? The Finance Minister was told to shut up when he declared that he hated Dollarization: now he says he's going to strengthen it, but let‘s analyze what he wants and why I feel this way. First, any country with a local currency or dollars simply must have fiscal discipline. This man states that he wants to take $ 600 million from the Stabilization, Social and Productive Investment and Public Debt Reduction Fund (FEIREP), the national oil savings, to put it in the budget and then give it away through political patronage under the guise of improving education and health, but what that will do, as always, is cause fiscal indiscipline, and the money will fall into bottomless pockets. Second, the State needs liquidity and he is talking about postponing the collection of VAT, which would cause a gap in the initial cash flow of at least $ 180 million per month. Third, speaking of the FTA and the need to enter into it, we must lower tariffs and raise the VAT. Meanwhile, the minister speaks of reducing the VAT to 10% and increasing tariffs, in other words, going against the tide, increasing smuggling and once again destabilizing the economy. Then, on the same subject, Palacios‘ Government talked perversely about having a referendum on the FTA, which would be the same as consulting the people about technical issues of dentistry, electronics or whatever. That is, these speeches are signs that the thread is being woven to make the economy collapse and then to take prosperity away from the poor (who they claim to defend), to increase power or that it has already been lost... or perhaps it is a new toy that goes to their heads. My commitment in the fight for Dollarization is to follow, step by step on the battlefield, along with other Ecuadorians who are not interested merely in personal gain. What we want is to be part of a country that is a leader in prosperity in America and not one that is the laughingstock of the affluent countries. And here I am not speaking of ideologies, because Chile has had leaders from various sectors after the Pinochet dictatorship but never depraved ones. They have tried to eliminate poverty, not the poor. Other early critics of Dollarization now recognize its virtue. The road continues, the struggle continues, but we are moving forward. The revolution of change is difficult, but history shows that great men do it and selfish ones stop it.

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Chapter IX § The positive legacy of Dollarization The pattern of Dollarization and restricted banking has decisive advantages for the growth of the national economy 

It returns the confidence that was lost because no one believed in the sucre: everything was negotiated in dollars, except salaries, wages and pensions of retirees.



When the discretionary powers of the Central Bank to devalue the currency were removed, Ecuadorians regained our buying power. Now they are our dollars, not the Central Bank‘s or the Government‘s, because our money is a product of our effort, our work, and neither the Central Bank nor anyone has the moral authority to confiscate, freeze or devaluate it.



This reduces the rate of inflation and interest rates.



It invigorates the economy because it is possible to plan long term and it restores the purchasing power of citizens; funds that were frozen became available.



This ensures real savings in deposits and attracts foreign capital.



Above all, it preserves the purchasing power of wages and retirees‘ pensions, and the income of the poorest people improves.

La dolarización fue y es el eje medular de nuestra propuesta macroeconómica.

Considerábamos que era el primer paso y el más importante que se debía dar para salvar este país, y así ha sucedido.

Pero, como lo expresara Pablo Lucio Paredes: "Una persona puede tener buena salud pero eso no le asegura prosperidad ni felicidad ni un buen matrimonio. Lo mismo sucede con la economía. La estabilidad monetaria no le asegura a un país prosperidad, felicidad o solución a sus problemas sociales". Tanto la salud como la estabilidad monetaria son condiciones necesarias para lograr los objetivos de bienestar que buscamos.

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§ The siren’s song There are still some who say that those who struggle to establish Dollarization have assured us that it will solve all of our problems.

This way of ―saying that we say" is a hoax widely used to discredit an idea or a new proposal, by those who would like to continue enjoying the privileges granted by discretionary power on the value of the currency, when the sucre was circulating in the country, or, as is happening now, with the way external debt is being negotiated and doubts about it.

All contemporary economists know that for a monetary policy to be effective, it must be credible. In countries where monetary policies have been erratic, only many years of consistent policies make it possible to rescue faith in the long-term.

Unlike the alternatives, Dollarization restored credibility immediately, even faster than convertibility (which maintains discretionary power, although much more limited than in a traditional system of fixed exchange rates), and of course, much faster than the exchange rate band system or floating regimes.

In Ecuador, where the weakness of institutions is evident, the advantages brought by the monetary scheme are obvious. § The most common myths Let's see what have been and, in some cases, continue to be objections and myths about the model and let‘s consider whether it is true that the social costs of Dollarization, in both the short and long term, are too high, in order to disqualify it.

MYTH: There are not enough cash reserves to dollarize False. As we calculated, using the Central Bank's latest figures, there were sufficient reserves for Dollarization. We even mentioned a possible excess of reserves that would allow us to have a stabilization fund.

MYTH: Dollarization causes a stop to exports False. In the first place, this ignores one of the fundamental principles of economics: the law of comparative advantage.

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Under that law, discovered more than 150 years ago, every country, however small or unproductive, can export those products or services that can be produced at a price that is relatively lower than other countries.

It is true that Dollarization eliminates some export products, but it is clear that those affected are the ones who were artificially benefiting from devaluation. Those companies, if they do not improve their competitiveness, reduce their actual costs, and improve their management, are doomed and should disappear.

It is easy to understand why, in a dollarized economy, international trade grows. If the value of the currency remains constant, both importers and exporters can expand their activities with no fear of suffering from the variability of the exchange rate. Moreover, the largest amount of commercial activity in the world is carried out in dollars.

MYTH: Dollarization increases unemployment False. There is no relationship between the unemployment rate and the currency or monetary system.

It is known that different levels of unemployment are due to factors such as job flexibility, unemployment insurance, or productivity levels; factors that have little or nothing to do with the exchange rate regime or monetary system.

In Ecuador, the combined rate of unemployment and underemployment easily reached 75%, a situation which arose precisely because the monetary authorities had the discretionary power to alter the amount of money in circulation and therefore its purchasing power.

Current reality admits no doubt; if international standards were used to measure unemployment, it could doubtlessly be determined that unemployment levels have fallen substantially.

Myth: The fall in export prices causes unemployment and recession False. According to the theoretical model known as the Mundell-Fleming model, used by economic theorists, when small countries suffer an external shock, which could be a drop in the price of an important export product (such as oil, bananas, shrimp or flowers, in the case of Ecuador) there is a monetary contraction, which is worsened by the fractional reserve system. In the absence of price and wage flexibility, the economy goes into recession as a result of monetary contraction. So far, the theoretical model is correct.

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However, concrete evidence shows the opposite. Between 1987 and 1989, Panama suffered one of the most serious external shocks that can happen to a country: the United States imposed economic sanctions that led to a military invasion.

During these years exports declined from USD $ 350 million, government revenues fell by $ 500 million and the U.S. invasion caused an estimated loss of $ 200 million (4% of GDP) from vandalism.

However, by mid-1990, commercial firms were already operating close to normal and since 1994 there has been no imbalance in the net capital flow nor has the level of current account deficit of the balance of payments changed. At the same time, the growth rate of income or economic activity has remained stable.

The Panamanian experience shows us that when there is a banking system integrated with foreign banks, monetary contraction is replaced by an inflow of capital brought from the parent companies.

In Ecuador, the banking system was not integrated as in Panama; thus people could think that monetary contraction would cause a recession and rising unemployment.

External shock could occur through capital flight, but it did not. In traditional systems, in which the central bank has the power to alter the exchange rate, capital flight is the result of a loss of credibility in the value of the currency. In a dollarized economy, such as we live in today, there is no risk, so one of the reasons for capital to escape has been nipped in the bud.

Of course there are other reasons for capital flight. It could be scared off by the threat of seizure, or the freezing of funds, or if traders perceive a Marxist government. In other words, an irresponsible government itself would cause capital flight. However, this happens with or without Dollarization. You cannot blame the monetary system when it is not causing the problem. The Panamanian experience is highly illustrative of this phenomenon. Bad governments and the United States military invasion chased capital away, but once these problems were solved, the money returned to its normal channels.

MYTH: You must first eliminate fiscal deficit False. It is known that Dollarization puts governments in a straitjacket because they can never resort to the "printing press" to solve the problem of expenses.

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First you have to remember some identities of national accounts. The private savings (PS) plus public savings (surplus in fiscal spending, that is the fiscal deficit as a negative, FD) is known as domestic savings (DS). If domestic savings exceeds investment (I), the Current Account (CA) would be in surplus.

This is demonstrated by the following equation (PS-FD)-I> CC> 0. If the current account balance is positive, it means there will be foreign exchange ccoming into the country.

But in a dollarized economy, the excess is borrowed or invested abroad. If, instead, the current account is negative, the deficit must be supplemented with loans or foreign investment.

In small economies such as Ecuador, the private domestic savings (DS) is extremely low and the fiscal deficit is large, therefore, to solve the current account deficit (PS-FD-CA< I >0). requires capital or foreign loans. Otherwise there would be no investment and consequently the economy would stagnate. The higher the fiscal deficit is, the more difficult economic growth is. Critics of Dollarization understand that in a dollarized economy this is not an equation but an identity. That is, the fiscal deficit directly affects the current account and in the absence of capital or loans from abroad, there would be monetary contraction, no investment and the economy would stagnate or regress. Therefore, they argued that deficit problem should be solved first, before Dollarization.

It is true that in Ecuador, the private domestic savings (DS) and foreign capital inflows were not sufficient to counteract the effects of fiscal deficit on the balance of payments. However, that was due precisely to the uncertainty created by a discretionary exchange rate system. We were suffering rampant inflation and we were on the verge of hyperinflation. Savings were eroded, and the higher domestic inflation was, the lower private domestic savings were. The frightening specter of devaluation terrified capital, so much so that they say there is no animal more cowardly than a million dollars.

The existence of a fiscal deficit, in fact, worsens the situation and increases the external imbalance. But if the currency exchange risk is eliminated, isnâ&#x20AC;&#x2DC;t that a reason for capital to enter? If inflation goes away, isnâ&#x20AC;&#x2DC;t that a motive to increase savings? In other words, the existence of a fiscal deficit required the establishment of Dollarization precisely to minimize the negative effects of the deficit.

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It is known that fiscal deficit is one of the macroeconomic variables that cannot be sustained over time (no one can survive if you spend more than your income) and this has to be solved by the government, with or without Dollarization.

Our argument is that Dollarization provides a solution to this problem. Therefore, the objection that it was necessary to first balance the fiscal accounts amounted to putting the cart before the horse.

MYTH: Dollarization requires a sound financial system False. One of the reasons for the deterioration of the situation in Ecuador was the erratic monetary policy that we had been suffering from for over 30 years.

The continuous currency devaluations, inflation, and the increasing tax burden, threw fuel on the flames of the devastating effects of the conflict with Peru, the El Ni単o phenomenon, the fall in oil prices, etc. All of this led to low credibility, and a short-term and highly speculative vision. Therefore the financial system gradually grew weaker until reaching the pre-Dollarization plight.

Today they are trying to update old practices with discretionary powers, without controlling the external debt and even a disproportionate increase in the tax burden, drying up the country's liquidity, so that later there is no alternative but to return to printing money without backing. This must never happen again.

There are two main reasons for a banking or financial system to be fragile: The possible lack of liquidity when depositors, en masse, withdraw their deposits, and the solvency of bank loans.

The problem of solvency is not solved by Dollarization, but it is minimized. To do this there are two mechanisms. The first is strict control by the appropriate authority, in this case the Superintendency of Banks. The second is the Panama system: Slightly more restricted banking, with freedom of operation, to facilitate the entry of foreign entities, so that market forces are the regulatory system.

Considering the geographic and economic situation of Ecuador, our country could now become a financial center to serve the southern cone countries and those on the other side the Pacific.

Dollarization reduces the problem of solvency because it reduces interest rates.

This reduction allows the productive sector to invest in profitable activities that previously were impossible due to high inflationary expectations and currency risk.

The effect on interest rates was one of the strongest reasons for Ecuador to replace the sucre with the dollar.

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MYTH: Dollarization is an obstacle to long-term growth False. This objection is more sophisticated and has to do with the ability of monetary authorities to counter natural or exogenous effects.

For example: if Ecuador goes into a recession while the U.S. is entering a phase of expansion, the monetary policy of U.S. authorities would be counterproductive to the Ecuadorian economy. In the United States, authorities would raise interest rates, while in Ecuador it would be necessary to lower them.

The argument suffers from an extremely interesting but fallacious assumption: that monetary authorities of Ecuador, with some foresight, would anticipate the economic cycles in the two countries. The lack of discretionary power of the monetary authorities to alter interest rates would prevent the Ecuadorian economy from developing harmoniously.

The falsehood of this argument is also valid for other cases in which timely, accurate and appropriate action is required by monetary authorities. First, the information available to the Central Bank, despite being the richest institution in the country, is always behind, not just days or weeks but in some cases, months or years. Even more, there have been cases where the figures are not correct. How can we trust monetary authorities to "anticipate" externalities, when their information is so far behind.Second, accuracy and promptness also require that decisions taken by the authorities must be consistent with the magnitude of the problem to be confronted. Could we trust the wisdom of our economists to make the right decisions? The history of errors by the monetary authorities, not to mention the ethically suspicious activities of some of them, was precisely one of the strongest reasons to eliminate their discretionary powers.

We cannot exclude the possibility that the gap in economic ceilings or external factors could not be corrected as we would like, but the Ecuadorian economy is rarely out of step with the U.S. Instead, the well known phrase is that when America sneezes, the rest of the world catches pneumonia. It is a clear indication that our economy moves consistently on par with the U.S. In that case, Dollarization is an asset rather than a weakness. Even if a lag were to occur, the social cost of having monetary authorities with discretionary powers is much higher than having an economy with a sound currency.

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The prospects for long-term economic growth are much more likely in a dollarized economy than in one that must "rely on monetary authorities," who are men of flesh and blood, with virtues and defects, but always fallible.

In summary, the lack of stability was one of the primary causes for the failure to achieve sustained economic growth in Ecuador. Such an economy could not get out of the crisis without a shock of credibility. Investment and savings only began to come when the country had achieved a certificate of good conduct, which was only obtained after a 180 degree turn, a radical change that broke the pessimistic expectations of economic agents and switched to others full of certainties and hopes.

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Chapter X § The importance of the second independence With Dollarization people are released from the yoke of those who hold power with discretion and manage the pockets of citizens: yours and mine and the neighbors’ and the farmers’.

How did we free ourselves from this yoke? We did it by assuming a strong currency, because with a strong currency that is not dependent on native discretionary powers, every man or woman becomes master of his or her pocket and is not subject to having income eroded but, on the other hand, is closer to prosperity.

Finally, the poor are able to improve their lifestyle. For example: With Dollarization, a domestic employee who lives in the house where she works has revenues of more than $ 250 a month (including benefits). Now she has the possibility, the option of buying a television or a refrigerator in installments. She can plan. Or she can save.

Before Dollarization in Ecuador, income and services crashed: each sector wanted to swallow the other. There was a mismatching, a perverse distortion between what went into the pocket and what came out of the pocket.

Why Independence today? Because people have learned to choose knowingly, because consumers have learned to discriminate between one service and another. That is: to take a product and compare its weight, components, ingredients, quality and price. Before you could not choose.

Before Dollarization in Ecuador, it didn‘t matter if the service or the product was bad, that was what there was, period, you could takeit or leave it. Today we can prioritize quality or cost or quantity or look for a balance.

Before Dollarization, the producer - whether industrial, professional, farmer or rancher, was not interested in the consumer. Dollarization pushed and pushed to make the consumer king. Competition creates efficiency among producers and creates wealth among consumers.

However, we must emphasize that Dollarization is not everything, no one should say that I think or say that Dollarization is all there is: Ecuador must be coherent in its actions with a strong currency to enable it to fulfill its economic role.

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Dollarization in the entire American bloc is the starting point for achieving the second Independence of America. Using the hard currency of our principal trading partner and the strongest one on the continent, we have implemented the same recipes in third world countries that have made those who nowadays lead the world in competitiveness and prosperity successful.

Why call Dollarization the second (and final) independence of Latin America?

While it is true that our continent still lags behind in the global context, there are profound changes that must now be taken into account: 1. Latin America's population is young. In countries like Ecuador, 70% of the

population is young people, many of them between 20 and 30 years of age.

That is the keynote of the whole region.

2. There is no longer a true right or true left in the people: Latin America today is

an ideologically unbiased continent because people are not interested in obsolete theories or ideologies.

3. However, the problem remains with the same people as always, those who

rotate in power from year to year and who are not pleased by Latin America implementing the same rules of the game that led the first world to prosperity.

This group of a thousand, or maybe two thousand, or those who I usually call "Ecuador's no" are those who are entrenched in power in every nation to stop all changes. Are we fighting the last battle against them or will it be more of the same? They are not many, but they are organized; they earn in dollars, but they want to have a local currency in order to prey on their victims by using currency devaluations to earn even more. So we must be alert to the lies and subterfuge used to undermine Dollarization because it does not suit them, going beyond outdated ideologies and patriotic sentimentalism.

There are people who want real change, those who want to play fair, to make the economy real in the long-term, who bet on free trade with fair rules. Most of them, however, are not interested in entering the ring and they prefer to watch the bulls from afar.

Consequently, in many countries, those of "Ecuador's No", athough they are fewer, win the battle because the good people leave the ring. Those of "Ecuador's no", when threatened with the possible loss of power, intelligently invent new monsters or ghosts to achieve collective hysteria in their favor. They satanized first the right, later the Liberals and then neoliberalism as "the cause of all evil." They branded privatization as villain focusing only on isolated negative cases and not on the positive ones, and as though it were a matter of fashion, they have demonized

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globalization rather than aiming to be efficient and they have attacked Dollarization in those countries that really show that we are changing, even if it is with a straitjacket that forces us to adjust, to be disciplined and to play fairly.

In these frequent disinformation campaigns, economic issues are confused, news flashes or spots are released to try to rebuild passion and put reason aside and, incredibly, there are people - many people - who believe it. Some people genuinely or naively believe that these attacks are the truth and they become double victims of predators.

At some point, I was reading an article in a local newspaper in Ecuador about the march of a group of farmers against the FTAA. The reporter asked one of the participants why they were against the FTAA. The participant said, "Because it is the cause of my poverty.â&#x20AC;&#x2013; When the reporter asked him to explain that and what the FTAA was, he was unable to answer. In conclusion, both the opponents and those who favor the FTAA are manipulated.

Many of them do not understand the consequences of the free trade agreement.

They are sheep following behind those who are sure of the outlook, of those who want to fight to maintain their privileges, and they use people of good faith to make a crowd against whatever they decide at the moment.

Ignorance is bold and dangerous: fueled by passion, it can be explosive. The daily result is that chaos still reigns and talk prevails over production, ideology, and tangible projects. As a result, poverty remains, and the Taliban, fine, thanks. Why arenâ&#x20AC;&#x2DC;t people protesting in favor of issues like openings for business, for example, outside global forums? It is definitely not because people are not in favor of it, but because it is easier to stay outside the ring.

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Chapter XI § A decade of struggle Finally, after a decade of effort, I managed to convince many Ecuadorians with my idea and Dollarization is a reality.

History has proved me right. Dollarization is a reality that has endured severe political and economic shocks and has become a concrete wall to preserve what we have now.

Now, in retrospect, some people, who are still skeptical, ask me why I didn‘t accept convertibility. My answer is simple: because it doesn‘t stop the vulnerability of having a local currency, because there is a way to turn back, because with Dollarization there isn‘t.

Dollarization is a sanctuary where people take refuge to be protected and not cheated, to no longer be victims. Some say that with Dollarization we have lost a symbol of nationhood, but that's a tremendous mistake: the symbol of nationhood is the prosperity that each country gives its people.

Chile is now a prosperous country, but that prosperity was built under a dictatorship that is not viable today. Chile has a real currency, stable and well managed, but it still has the UF (Development Unit). All long-term transactions are conducted through the UFs that are an instrument similar to the Ecuadorian UVC (Constant Value Unit) which failed in our country.

Then, what have we done in Ecuador?

Fair play: first, we restored ownership of the currency to the people. Additionally, the first world countries have to understand that they can no longer prey on domestic markets emptying the pockets of the population and making it safe from the inefficiencies of groups that usually are in power and not interested in disciplining themselves.

In our country, we are tired of diagnoses and throughout Latin America we continue reviewing, seeing and making the same mistakes. We need solutions.

However, when it comes to the solution to the tragedy, nothing happens because major issues are covered up and because our memory has failed us.

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In Ecuador, the power of the currency has returned to people. However, there are still many things that have not been supplemented and cause doubts about this great model, doubts that we must eradicate for once and for all.

Latin America must build a 21 st century agenda, which should be similar in all countries, but it is necessary for this agenda to be the commitment of an entire nation so that government policies will no longer be implemented, but rather state policies, where presidents of the Republic will be leaders on this highway to prosperity.

Dollarization is a guarantee in the long term. It allows citizens to know that no one is going to reach into their pockets through devaluations and it allows citizens to force their leaders to comply with laws that are necessary. The main ones: management of finances and a long-term fiscal policy with which no one spends more than is produced and the government budget is capped in relation to the Gross Domestic Product (GDP).

For example, in each category, be it education, health or military, a specified percentage of GDP must be allocated for spending or investing, not just any figure or one at the whim of a certain group, but keeping the same percentage each year and trying to make it be the GDP that grows annually: this is the only way to increase the revenue allocated to each sector. If the GDP falls, we are all equally affected, and it is in everyoneâ&#x20AC;&#x2DC;s genuine interest to have a healthy growing GDP. Thus the rulers will be subjected and forced to put their house in order and lead the ship to prosperity. In that situation, the incumbent president will be measured according to the percentages of prosperity that he has given his people, according to the progression of the nationâ&#x20AC;&#x2DC;s long-term agenda.

Dollarization is the second independence of America because it forces fair play. It is not possible for the civil society of a nation to allow itself to be preyed upon by agreeing to reduce its income through devaluation. In hindsight, we know that what Argentina should have done was move from Convertibility to Dollarization, a scheme that would force the nation to put pressure on its president to do real debt restructuring, real tax reform, and a tax cut to revive the economy.

History will be the judge because what happened is that a few people eliminated their debts and many, who are the majority, lost their life savings. This local currency in Argentina, which is said to be the symbol of nationhood, is, in fact, the symbol of the violation of human rights. Why havenâ&#x20AC;&#x2DC;t the alleged human rights defenders ever protested against this grotesque crime?

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Real human rights in the world have to be rescued; we must accept that the economy is for everyone and that only and exclusively by playing fair is it possible to search for greater prosperity for the nation. The rest of the recipe: a fair longterm policy in which oil stabilization funds and stabilization funds for cases of natural disasters prevail, in which the rules of the first world are used to protect and use the savings of the population and monopolies are eliminated and not simply changed from state monopolies to private ones but in which the free market rules, precisely because democracy is freedom and freedom is nothing but respect for the citizen.

Milton Friedman said that freedom is essential to preserve the free market and that the single most important fact about this free market is that "no exchange takes place unless both parties benefit. If A and B make an agreement, it is because they both win.â&#x20AC;&#x2013; However, governments can use coercive power to make an exchange in which A benefits and B loses. Hence, markets emerge precisely to avoid such artificial restrictions.

In countries that have collapsed, there is no democracy, no freedom and they have created large black markets. I have always maintained that there is nothing more cowardly in the world than a million dollars, since those million dollars go where there is legal certainty and inevitably run from wherever it is not found. But, they run to where the rules are clear, where respect and human rights are not used to get those who have violated the law out of jail, but to ensure that people donâ&#x20AC;&#x2DC;t become victims. This legal framework means "No to monopolies, yes to free markets." That demands some important things besides Dollarization: 1.

A country with few laws, but laws which are not discretionary.

2.

A hard first world currency.

3. The implementation of first world formulas, such as labor flexibility, and not preying on people's pockets and having the power and the ability to have a thriving domestic market, with an economy in which exports are not primary commodities, but value-added exports, products that one is able to position abroad because of their competitiveness, because the latter is necessary, not for Dollarization, but for globalization.

4. Competition, which has two key ingredients: innovation and creativity. For populations to develop them requires a State which is not an obstacle, a government that provides an appropriate economic environment to and favos not class struggle but the union of citizens.

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5. I wish to refer to those civil rights, which are recorded as guarantees enshrined in the constitution of the republic, but are nothing more than dead letters in the institutions of our country. They are enshrined in Article 23 of the Constitution, particularly that of access to high quality goods and services, or the right to property and especially legal security.

In addition to Dollarization, there is another tool that civil society must take into account, which is public opinion. Precisely those people who believe in democracy, freedom, competition and the common good, must multiply to form a public opinion in favor of moral values, free enterprise, competition, honesty, in favor of fair play, and in favor of welfare.

I hope this book will serve as a lesson not only for Latin American countries but also for the United States because that nation has to understand that only if Latin America thrives will it have a large strong market where both benefit: the United States because it to has significant economic growth as a result of purchases made by Latin America, and Latin America because it can prosper by having an important domestic market and an international export market, and that prosperity will be a two way street.

As long as that is not understood, as long as the United States does not encourage trade and monetary unity in Latin America, we will see an increase in that which should be ended in this region: poverty.

For these reasons, the second independence of America begins with the dollar and continues with the entire scheme of options that I have presented in this book and is nothing more than testimonies from real life and the tragedy of a continent, the richest in the world, and one of the youngest in the world, with thousands of opportunities but with many hurdles to jump and plugs to remove.

I conclude with the hope that this book moves the youth â&#x20AC;&#x201C; in age and in spirit - to fight for their future and that of their families, to stay in their country and to achieve honestly, with ethics, justice and equity, that all sectors of society fight and manage to create 21st century America.

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Dollarization: A country shielded Introduction 5 Chapter I A personal testimony 13 The political crisis 15 From reflection to the proposed 17 The idea grew 20 Who did Dollarization favor? 22 The change brought stability 25 Obligation: to be competitive 27 Chapter II America and the First World 31 America, the continent of opportunity 31 United States, strengths and weaknesses 34 The real goal of multilateral institutions 44 Central Banks, why? 54 Women, NGOs and other strengths in the region 57 The role of political parties 59 The Stoppers 60 Chapter III At the gates of Dollarization 63 To believe again 64 Gestation and birth 65 Chapter IV The crisis erupts 75 March 8, 1999: The corporate collapse 82 The March of the Black Mourning Bands 87 Chapter V A surreal economy 91 Pressure and distrust 93 A sabotaged and tortured implementation 100 A personal battle of ethics, justice and equality 104 Chapter VI The first results of dollarization in Ecuador 109 On the economic scene 111 A reflection 114 But ... inflation continued 115 On the political scene118

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In trade relations 122 In tourism 124 The road to the goal 125 Chapter VII The marathon of prosperity 133 Chapter VIII Politically bored countries are happy 143 A shield for the political crisis 146 Government inefficiency 151 Chapter IX The positive legacy of Dollarization 157 The sirenâ&#x20AC;&#x2122;s song 159 The most common myths 160 Chapter X The importance of the second independence 173 Chapter XI A decade of struggle 179 Annex: Tables â&#x20AC;&#x153;26 years: The Itch of Ecuadorian Democracy"187

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