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Ecuadoreans confused as dollars replace local currency

By Miguel Vega

QUITO, Ecuador, April 4 (Reuters) - The introduction of the U.S. dollar to replace the much devalued sucre has baffled many Ecuadoreans, who are unsure how much the greenback is worth and are wary of counterfeit notes.

``I don't have any idea how to work with the dollar. I think they should have given us instructions on how to do this,'' said Melba Mero, who sells electronic goods in a street market in Ecuador's Andean mountain capital Quito.

In a desperate attempt to stabilize South America's most rickety economy, Congress passed a law in early March to phase out the sucre, which lost two-thirds of its value last year amid a severe recession and now trades at 25,000 to the dollar. The rapid devaluation fueled inflation to an annual 80 percent, the highest rate in Latin America.

Under the government plan, the dollar will be the main domestic currency, replacing the surce, which will only remain in circulation for small purchases as cornershop transactions.

As of April 1, Ecuadoreans have found that bank cash machines dispense only greenbacks and not the multicolored, often filthy and torn, sucres.

But opinion polls indicate that only one in five Ecuadoreans has ever seen a dollar bill in their life, and 50 percent of the population has no idea what ``dollarization'' is.

The South American country of 12 million people also partially defaulted on public sector foreign debt of $13 billion in 1999. Ecuador's economy is reeling from the ravages of violent storms in 1998, spawned by the freak El Nino weather phenomenon, which tore up roads and bridges and ruined crops. Compounding Ecuador's economic woes was a period of low prices for its key export, oil, while the country staggered under an unsustainable debt burden.

To lift the country out of a 7 percent recession in the gross domestic product last year, then President Jamil Mahuad proposed ``dollarization''.

But native Indians, who feared it would push up prices even further, staged massive protests that culminated in a brief military coup in January. Mahuad's congressionally-named successor, President Gustavo Noboa, pushed on with the dollar plan regardless.

COUNTERFEIT MONEY IS MAIN FEAR

Ecuadoreans' unfamiliarity with the U.S. currency could lead to a massive influx of counterfeit dollars, say analysts.

``Some people already tried to give us fake dollars, and now I have one too. So what do I do? One dollar, 25,000 sucres just thrown away,'' complained fruit merchant Carmen Casillas.

``People just don't know how to recognize fake bills,'' she added while she carefully arranged the fruit she hoped to sell.

At the Ecuador-Colombia border, police arrested a man last week who tried to enter the country with $300,000 in false dollar bills.

The Ecuadorean public has also been overwhelmed by the task of mathematically converting dollars to sucres, or vice versa, in everyday business and life.

Sucres will still for the moment be used for some small transactions, at a fixed rate of 25,000 sucres per dollar.

The Ecuadorean government launched a massive information campaign on Monday to familiarize its citizens with the dollar.

Television ads have given advice and featured security specialists who explain the dollar to viewers.

``I don't understand this dollarization business, so I'm confused as to how I'm going to make money. I don't know what dollarization is going to be like and what they say on television I don't understand,'' said a woman who asked not to be named.

Over the weekend, several workers' groups called for people to reject the dollar in everyday transactions.

``People are familiar with the sucre. Within it is narrated part of our history. Now we have these coins with faces that are completely unknown for us, distant from our history, from what we are,'' Arcesio Vega, an architect, said indignantly.