An emergency law dubbed the Humanitarian Support Organic Law would “lockdown” Ecuador’s central bank, siphon it from the public sector, and place its financial sovereignty at the whims of private interests under the guise of saving the country from de-dollarization.
With just days until Ecuador’s February 7 presidential election and four months remaining on President Lenin Moreno’s mandate, the Ecuadorian government and right-wing elites are still scrambling to privatize the country’s central bank.
The process involves fast-tracking an emergency law dubbed the Humanitarian Support Organic Law, which will “lockdown” the central bank, siphon it from the public sector, and place Ecuador’s financial sovereignty at the whims of private interests.
According to right-wing figures and the country’s mainstream media apparatus that protects and serves its interest, the unconstitutional move is being touted as a necessity. Both parties have claimed that the measure would “safeguard” the country’s dollarization. In 2000, the U.S. dollar was implemented as part of the country’s national monetary system during the neoliberal administration of Jamil Mahuad. Sixteen financial institutions were bailed out by his government at a whopping cost of $2.6 billion.
Ecuador’s dollarization occurred just months after the infamous “bank holiday,” in which 70% of all banking institutions declared bankruptcy, hurling the Andean Republic into its worst economic crisis in a century. Millions of people lost their life savings during the chaos and the former national currency, the sucre, plummeted in value by 195%.
A migrant crisis accompanied the economic downturn. More than 267,000 Ecuadorians fled the country during a two year period (1999 and 2000), eventually leading to a total of 2.2 million Ecuadorians migrating, a figure that at the time represented nearly 20% of the country’s population. Even more lost their life savings. The middle class was obliterated and inequality worsened.
The current claim that the country’s dollarization needs to be “safeguarded,” a claim repeated by the political and economic elites, local media, and the bulk-some of the 15 presidential hopefuls, is rooted in the work of the leading presidential candidate, Andrés Arauz.
Since the end of Rafael Correa’s term in office, Arauz has been in charge of the Dollarization Observatory. This organization informs the public on economic matters, often focusing on the ways in which neoliberal interests threaten Ecuador’s economy. The myth claiming that Arauz wants to forcibly remove the dollar as the national currency comes from an article he wrote last April in which he gave examples of “good and bad” de-dollarization processes. Opponents of the front-running presidential candidate seized on the chance to criticize the piece, claiming that Arauz intends to withdraw all U.S. dollars from circulation. Though the dollarization of the economy was, indeed, a bad idea “at the time,” Arauz has not expressed nor has any intentions of de-dollarizing the economy.
The privatization of the central bank, however, will put a dollarized economy at risk, as it would open the floodgates for billions of dollars to be transferred to places like Panama and other tax havens. It would, in effect, force an already crumbling public sector to subsidize the capital flight.
The emergency law would also prohibit the central bank from issuing bonds to the government, forcing authorities to increase the foreign debt during the current economic and health crisis.
The law would also completely disassociate Ecuador’s principal financial institution from any government oversight. Consequently, a board of directors named by Moreno, a president with a 7% approval rating and who has co-governed alongside powerful economic groups, will be charged with this responsibility. Uncontested authority over the central bank and its economic policies will be wielded by the board and private interests.
A requirement to fulfill an International Monetary Fund financial package, the emergency law would institutionalize current austerity measures and solidify the inequalities that were aggravated by the COVID-19 crisis.
With a recent Comunizaliza poll showing Arauz not only in the lead but commanding a decisive first-round victory, Ecuador’s right-wing minority are trying to pre-emptively cripple a progressive government no matter who bears the brunt.