U.S. Pledges Support, Calls for Calm in Ecuador

BOSTON (Reuters) - U.S. Treasury Secretary Lawrence Summers said on Saturday the United States would support crisis-hit Ecuador as it struggles through its worst economic crisis in decades amid mounting political instability.

``We have been following developments in Ecuador closely,'' he told reporters on the sidelines of an economic conference. ''The achievement of stability and confidence in Ecuador would be very much in the interest of the United States.''

Ecuador, a poor country of 12.4 million people, is caught in a painful economic slump. Its inflation was the highest in Latin America last year and its economy is believed to have contracted 7.3 percent in 1999.

Ecuador's sucre currency finished the first working week of 2000 down 17 percent, after diving 67 percent in 1999.

After months of negotiations, the cash-strapped country signed a letter of intent with the International Monetary Fund last September, promising bold economic reforms, higher taxes and a stronger financial sector in return for an IMF loan.

But the government has yet to fulfill the promises it made in that letter, and the IMF loan has not been finalized. The IMF said it will resume talks with Ecuador next week.

``It is in the interest of the United States to have there be economic stability in any country, and particularly in democracies in our hemisphere,'' said Summers.

``That's why we will certainly be pleased to support international financial institution efforts that are conditioned on Ecuadorean policy in what is not an easy situation,'' he added.

Summers declined to specify whether the United States would contribute money to a potential IMF rescue loan for Ecuador.

On Friday, President Clinton called Ecuador's besieged president, Jamil Mahuad, to express his support in the country's growing economic crisis.

Mahuad, struggling to keep the economy afloat and stop the currency from sinking, came under more pressure to quit on Friday when oil workers went on strike in a bid to force him from office. He had imposed a state of emergency on Thursday in the face of snowballing opposition.

The IMF's second in command, Stanley Fischer, said on Friday that talks with Ecuador were making progress. ``It will be important to try to stabilize the currency, and that will require a return of confidence,'' Fischer said.