Ecuador’s Parliament approves controversial law maintaining and regulating “dollarization”

RIO DE JANEIRO, BRAZIL – The plenary of the National Assembly (Parliament) of Ecuador approved this Thursday with 84 votes in favor the controversial Law for the Defense of Dollarization, criticized by the opposition and expected by the government as a guarantee to strengthen this monetary system adopted by the country in 2000.

With 86 affirmative votes, 41 negative votes, one blank vote, and five abstentions, the plenary of the Assembly approved in a second and final debate the project of reforms to the Monetary and Financial Code for the Defense of the Dollarization described as urgent in economic matters.

The Assembly indicated on its website that the approval of the regulation would be sent in the next hours to the President of the Republic, Lenín Moreno, for his approval or veto.

During the debate, which took place on the Internet, supporters and opponents of the law warned of the benefits and risks of the regulation, whose approval is tied to the credit agreement for US$ 6.5 billion that the Ecuadorian government signed with the International Monetary Fund (IMF).

One of the biggest debates was about the return of political and financial autonomy to the Central Bank, which, according to those who defend it, will guarantee the economy’s stability and strengthen the country’s financial policy. However, the detractors consider it as a “privatization” of said institution.

According to a report of the debate, published by the Assembly, those in favor of the project pointed out that the regulation will improve the Central Bank structure, strengthen dollarization, generate greater liquidity, attract investments, and promote transparency in the management of the financial system.

On the other hand, opponents warned of possible unconstitutional biases in the regulation, which opens the possibility of capital flight, and pointed out that the stability of dollarization does not depend on the international monetary reserve but the balance of payments.

Read: Dollarization in Ecuador, a straitjacket that no candidate dares to question

The project seeks to “regulate the generation of the country’s monetary public policy technically through the Monetary Policy Regularization Board, which the Central Bank will implement”, which must have “due autonomy”, indicated the Assembly in its communiqué.

After learning of the law’s approval in the Assembly, the Minister of the Economy, Mauricio Pozo, expressed his satisfaction with the legislative work and said that the regulation would provide greater stability to the national economy.

Ecuador’s Assembly “has taken a crucial and fundamental step to defend economic stability and dollarization. Thank you for supporting this reform. The country wins with the approval of this law. A triumph that will benefit the present and the future. We move forward!” wrote Pozo on his Twitter account.

Dollarization [the adoption of the U.S. dollar as the national currency] was approved in Ecuador in 2000, after the deep financial crisis that shook the country between 1998 and 1999 considered the worst in national history, with some thirty private banks intervened by the State and whose rescue cost more than 8 billion dollars to the national treasury.