Ecuador To Adopt Dollar As Currency

By MONTE HAYES Associated Press Writer

QUITO, Ecuador (AP) - Ecuador's embattled president on Tuesday defended his plan to replace the country's currency with the U.S. dollar, as large Indian and labor groups renewed demands for Jamil Mahuad's resignation.

The Indian organizations, which have protested frequently in the past, said they planned demonstrations Saturday to force Mahuad's ouster and to shut down Congress and the courts as part of their drive for a government that will work on behalf of the poor.

``A government of national salvation is necessary,'' said Antonio Vargas, president of the Confederation of Indigenous Nationalities of Ecuador, the nation's largest Indian federation.

The Popular Front, a grouping of leftist-led unions, student organizations and grassroots neighborhood associations, said Tuesday it would resume street protests.

The president defended his currency plan as the only solution to end Ecuador's economic chaos and said all necessary force would be used to maintain order.

``They have the right to ask, to aspire and to put forth ideas,'' Mahuad said during a public ceremony. ``But there is no right to break the rule of law and the constitution, and much worse, to endanger the economic and social stability of the nation.''

Some political analysts believe Mahuad's position remains tenuous and could deteriorate rapidly if his plan runs into roadblocks.

``It's a desperate step,'' said political scientist Simon Pachano. ``It's more a political measure than an economic measure. Last week Mahuad was at the point of falling and made this decision as the only way to save his government.''

Mahuad, a Harvard-educated political centrist who took office in August 1998, has faced growing calls to resign after failing to stop the rapid decline of Ecuador's economy.

Last year, the economy shrank 7 percent and inflation topped 60 percent, the highest in Latin America. Many economists predicted that speculation against the sucre currency would quickly send Ecuador into hyperinflation this year if the government did not act.

Scrapping the national currency means Ecuador can no longer print extra money to meet its budget, thus eliminating a major cause of inflation.

Defense Minister Jose Gallardo, a retired army general, headed a delegation of the military high command in a visit to the national palace to express support for Mahuad.

``The armed forces have come to reiterate their loyalty and collaboration so that the year 2000 will be filled with accomplishments on behalf of the Ecuadorean people,'' Gallardo said.

Past protests by Ecuador's 3.5 million Indians, including blocking the country's major highways, have rarely led to changes in government policy.

And turnout for last week's protests in Ecuador's main cities by leftist-led organizations amounted to only a few thousand demonstrators who were easily dispersed by police. Soldiers empowered by a state of emergency to arrest and contain protesters were largely uninvolved in controlling the demonstrations.

The indigenous and labor groups say they will face further impoverishment under Mahuad's plan to buy back the sucre over the next year.

Mahuad received good news Tuesday when his strongest opposition in Congress, the pro-business Social Christian party, backed the plan. But party leaders criticized the planned exchange rate of 25,000 sucres to the dollar, saying it would impoverish thousands of people with savings in sucres.

The value of the sucre recently plunged 20 percent in less than a week to 29,000 to the dollar. A year ago, 7,000 sucres equaled $1.