Ecuador Head OKs Dollar as Currency

AP Photo

By GONZALO SOLANO, Associated Press Writer

QUITO, Ecuador (AP) - Ecuador's president on Thursday signed a controversial bill into law that will make the U.S. dollar the official currency of this small Andean country.

``This is a law long anticipated in Ecuador that will provide a new structure to the nation,'' President Gustavo Noboa told reporters.

Noboa ratified the reform package before boarding a plane to attend the swearing-in of Chilean President Ricardo Lagos. Congress had passed the bill early last week.

After Noboa's flight departed, international lenders in Washington announced a three-year, $2 billion aid package to help finance the rebuilding of Ecuador's economy, with the dollar plan as the cornerstone of the restructuring.

The country can now count on a $425 million lifeline from the World Bank, while the International Monetary Fund said it will contribute $300 million, and the Inter-American Development Bank pledged a further $620 million.

The Corporacion Andina de Fomento, an Andes-based development bank, will provide the remaining $700 million.

Ecuador had been desperately negotiating for the aid after defaulting last year on its foreign debt, which now tops $16 billion.

The bill signed by Noboa lays out a 180-day schedule to withdraw the local currency, the sucre, from circulation and replace it with the U.S. dollar.

Ecuador now joins Panama and nine other developing nations where the dollar is legal tender.

Noboa has said that changing the currency is the only way to stabilize Ecuador's economy and halt rising inflation, which currently tops 90 percent, the highest in Latin America.

The switch will prevent the government from printing extra money to meet its budget after years of deficit spending, eliminating a major cause of inflation.

Ecuador's mostly poor population of 12 million people had expressed skepticism about the currency switch.

The dollar plan was one of the issues that prompted hundreds of Indians and young army officers to seize the empty Congress building on Jan. 21, leading to then-President Jamil Mahuad's ouster.

Power was ceded to Noboa, the democratically elected vice president.