Ecuadorian Facts

According to the U.S State Department, approximately 150,000 U.S. citizens visit Ecuador every year and about 20,000 U.S. citizens reside in Ecuador. There are at least 100 U.S. companies doing business in the country.

The United States is Ecuador's principle trading partner. Ecuador imported $3.6 billion worth of goods in 2009, and increase of 8% over 2008 and accounts for about 25% of Ecuadorian imports. Ecuador is the 46th-largest market for U.S. exports. Major U.S. exports to Ecuador include machinery, chemicals and fertilizers, computers and electronic equipment, petroleum products, transportation equipment, and paper. The best prospects for U.S. firms are in the plastics, decontamination equipment, franchising, and medical equipment and devices sectors. U.S. firms remain competitive and successful in many sectors of the market.

Ecuador and the U.S. agreed in 1999 to a 10-year arrangement whereby U.S. military surveillance aircraft could use the airbase at Manta, Ecuador, as a Forward Operating Location (FOL) to detect drug trafficking flights through the region. The Ecuadorian Government informed the United States in July 2008 that it would not renew the lease for the Forward Operating Location when it expired in November 2009. The U.S. ceased these counternarcotics flights in July and departed the FOL in September 2009.

 


 

Ecuador uses the US dollars as its currency. How the creation of billions of US dollars by Bernard Shalom Bernanke and the US Federal Reserve will affect those economies, like Ecuador, whose legal tender is the US dollar, is yet to be seen. One thing is certain, all fiat currencies, fiat currency being a currency that is without substance, eventually collapse.

The US has been off the international gold standard since August 5, 1971, when then President Richard Nixon, in repsonse to France's request to exchange their dollar reserves for gold, reneged on the US promise to redeem dollars in gold, and went off the gold standard. The US dollar has thus been unbacked for nearly 40 years. As more nations move away from using the dollar as a medium of exchange, see China and Russia Quit Dollar, we are now witnessing the end of dollar world reserve dominance. In still another move to make the Yuan an international trading currency, individuals in the US can now open Yuan denominated savings accounts with a $500 equivalent minimum balance. The bank also offers certificates of deposit in 6-month and 1-year terms with a minimum of $1,000 equivalent.Bank of China Brings Yuan Trading to the US

What will happen when other nations, besides Russia and China, start using currencies other than the dollar, in bilateral trade? Worse, what happens to the Ecuadorian economy when the dollar is no longer accepted as payment in any trade?   This refusal could very well occur, if producers feel the Federal Reserve is creating, out of thin air, too many dollars and thus decreasing the value of those dollars held by everyone else in the world. No other government in the world has the luxury of being able to create as much of their currency as they desire simply because so many individuals and nations worldwide are willing to use as a medium of exchange, and hold the US dollar, as a reserve currency. 

That willingness may soon come to an end. What will happen in nations, like Ecuador, when the US dollar is no longer accepted as a medium of exchagne, is yet to be seen. Ecuador will certainly need to devise another currency, perhaps, and most likely, reverting back to the sucre.

Ecuadorians should be in good hands, as far as having a president who understands, or should understand, economics. The current president, Rafael Correa, studied economics at the Catholic University in his hometown of Guayaquil, and then went on to get two masters degrees - one in the US and the other in Belgium - and, in 2001, a PhD.

Correa is also not afraid to go toe to toe with the US government: Correa refused, as noted above, to renew the lease on airbases used by US forces to mount anti-narcotics missions. And, in February 2009, Ecuador, under the leadership of Correa, expelled two US diplomats, accusing them of meddling in the country's internal affairs.

It will be interesting, to say the least, to see how a US trained economist, with a backbone when it comes to dealing with US interests, deals with any currency problems that should arise while he is in office.

Also, and an important point not to be overlooked, by using the US dollars as legal tender, only Bernanke, the Federal Reserve and the US government receive the benefits of being able to create money out of nothing. When and if Ecuador's economy should find itself in trouble because of a falling or collapsing dollar, it will be a great temptation for Correa, who is afterall, a politician, to want the option to do for his government what the US does for itself, that is, print money. Lots of money.

 See also Heritage Foundation 2011 Index of Economic Freedom Ranking