Ecuador Defends Dollarization

Reuters Photo

By Carlos A. DeJuana

QUITO (Reuters) - Ecuadorean President Jamil Mahuad defended on Tuesday his plan to dollarize the economy and put the finishing touches to the legislation while military and police prepared for protests Wednesday.

Former government officials joined a chorus of condemnation of the plan to scrap the sucre currency, saying Mahuad only wanted to save his unpopular presidency with economic stratagems

that would be impossible to implement.

The plan would legalize the dollar as the official currency and gradually take the sucre virtually out of circulation in exchange for the greenback at 25,000 sucres to the dollar. Only small transactions would remain in sucres.

With his 17-month administration enjoying a sudden boost in opinion polls on the back of the proposal, Mahuad promised that adopting the dollar would end ``anguish and desperation'' of the Andean country's worst economic crisis in decades.

``The idea is to improve people's lives as much as possible,'' Mahuad said in a television interview.

Finance Minister Alfredo Arizaga said a dollarized economy would slash inflation, the highest in the region, and the promise of a stable currency would lure investors to the Andean country, reactivating its flagging export sector.

``This is more important than any help by an international lending agency,'' Arizaga told local television. ``This is going to be the country's main motor for a recovery in production.''

Officials of Brazil and the United States said they would be keeping track on the plan's developments.

``We regard this as a bold step, a far reaching fundamental change in the financial system of Ecuador,'' said State Department spokesman James Rubin.

But analysts and former members of the Central Bank questioned the move and wondered whether Mahuad, running low in the polls before Sunday's announcement, was thinking more about his political career than sound economic policy.

``He's bought time with dollarization, but its a plan without any technical fundamentals,'' said Franciso Huerta, a political analyst.

Pablo Better, who resigned as Central Bank chief Monday in disagreement with the scheme, said Ecuador's economy had too many problems to make dollarization a viable solution.

``A restrictive and inflexible currency system is not viable before we resolve the great imbalances plaguing the economy,'' Better said in his letter of resignation.

Teachers and students planned to add their voices to the criticism Wednesday, organizing a protest through the streets of Quito to ask for the presidents resignation.

Police chief Jorge Villaroel told reporters the police and military would use force if protests disturbed the public order. ``We hope there will be no violence,'' he said.

Up to 10 people were hurt in demonstrations last week in clashes between police and protesters.

Indigenous groups said they planned to go ahead with a protest Jan. 15 and workers for state-owned oil firm Petroecuador have said they will begin an indefinite strike Jan. 17.

The country of 12.4 million people is groaning under high poverty and unemployment levels while economic output is only slightly higher than its foreign debt
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UK Says Tests Show Pinochet Unfit for Trial

LONDON (Reuters) - Britain said on Tuesday that independent medical tests showed former Chilean dictator Augusto Pinochet was unfit to stand trial in Spain on torture charges.

The Home Office (interior ministry) said Pinochet's release was subject to legal representations by Spain, Chile and other interested parties within the next seven days.

The Home Office's statement did not spell out what the government's next moves would be, but appeared to hold out the prospect that the 84-year-old former general would be sent home rather than face trial in Spain, which has requested his extradition.

``The unequivocal and unanimous conclusion of the three medical practitioners and the consultant neuropsychologist is that, following recent deterioration in the state of Senator Pinochet's health which seems to have occurred principally during September and October 1999, he is at present unfit to stand trial, and that no change to that position can be expected,'' the Home Office said.

It said that subject to legal representations, Home Secretary Jack Straw was ``minded...to take the view that no purpose would be served by continuing the present extradition proceedings.''

The Home Office said it was writing to authorities in Spain and Chile as well as other parties, and that Straw would make a statement to parliament on the case when it had finally concluded.

Chile requested the medical tests last November after reports that Pinochet was in poor health while awaiting the outcome of the extradition procedure.

Pinochet has been under house arrest in Britain for nearly 15 months. His supporters say he is frail and has suffered a series of strokes.

Straw has the power to block extradition on compassionate grounds if he thinks Pinochet is unfit to stand trial.

The former dictator was arrested by British police in October 1998 at the request of Spanish judge Baltasar Garzon, who wants to try him for human rights abuses dating from the latter part of his rule from 1973 to 1990.

Pinochet has insisted he is not guilty of the 35 charges of torture and conspiracy to torture and says the case violates Chile's sovereignty.

He has lived under 24-hour guard in a house in a wealthy suburb just outside London and is allowed visitors, who have included former British prime minister Margaret Thatcher.

Earlier Stories

• Ecuador Dollar Plan Meets Support, Resistance (January 11)
• Ecuador Defends Dollar Plan, Doubts Remain (January 10)
• Ecuador Defends Dollar Plan But Doubts Remain (January 10)
• Protest Pressure Piles Up on Ecuador's Mahuad (January 7)
• Ecuadoreans Demand Unpopular President Quit (January 6)
• Ecuador Declares Emergency With Economy in Crisis (January 6)