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Ecuador Congress commission begins dollar debate

By Gustavo Oviedo

QUITO, Feb 21 (Reuters) - A congressional commission in Ecuador began Monday debating a controversial package of bills the government hopes will stabilize its topsy-turvy economy, including one radical proposal to adopt the U.S. dollar.

Dubbed the ``Economic Transformation Law'', the legislative package includes bills which would allow greater job flexibility, open up the oil, energy and telecommunications sectors to greater foreign investment and a plan to virtually scrap the local currency for the U.S. dollar.

President Gustavo Noboa, who took power last month after a brief Indian and military uprising ousted President Jamil Mahuad, is betting the plan will lead Ecuador out of one of its worst economic crises ever by slashing spiraling inflation and spurring growth.

The 62-year-old lawyer and academic says 80 of the 123 votes in Ecuador's unicameral Congress are in favor of his plan, even though polls show 74 percent of the country's 12.4 million people are against the ``dollarization'' of the economy, fearing it will hike prices.

Ecuador's top exporters chamber also showed its discontent with the proposal on Monday, saying the dollar should only be adopted by country's whose economy is as robust as the United States.

``To substitute the sucre (local currency) for the dollar won't magically transfer to our weak economy the efficiency and productivity of the U.S. economy,'' said Luis Maldonado, president of the Federation of Ecuadorean Exporters.

Exporters also fear adopting the dollar will make their goods less competitive in international markets.

But analysts say those negative effects could be outweighed by significantly lower inflation and a stable currency which would lure foreign investment. The sucre fell 67 percent in 1999 and another 17 percent in the first week of 2000 before Mahuad unveiled the dollar plan.

Opposition to ``dollarization'' -- as it is called locally -- also helped boot Mahuad out of office Jan. 22 after thousands of Indian protesters won the military's support. Noboa, Mahuad's vice president, was installed as Ecuador's fifth president in three years hours after the brief coup.

Plans to open up the oil sector, Ecuador's biggest source of revenue, also met resistance Monday from some congressmen.

Opposition lawmakers claim the new law to open up the oil sector gives the government too much discretion when choosing which foreign firms can invest locally.

``We can't allow the government to give up our hydrocarbon infrastructure without an auction,'' said Henry Llanes, a congressman for the opposition Democratic Left party.

He said the current proposal would allow for ``the worst acts of corruption.''

Once the Economic Matters Commission finishes debating the package it will be sent to the full Congress for debate. Legislative sources said the package could be sent as soon as Tuesday, because the government has tagged the bills as ``urgent.''