what does 'dollarisation' mean for Ecuador Date: Wed, 19 Jan 2000 NATIONAL PARLIAMENT OF THE PEOPLES OF ECUADOR - COMMISSION ON THE ECONOMY DOCUMENT OF THE SUB-COMMITTEE ON DOLLARIZATION Dollarization operates exclusively in industrialized economic systems, which are governed by the flow of foreign exchange dollars, colonial economies based exclusively on commerce, tourism and monetary speculation. There are only 12 dollar colonies in the world, among them the Virgin Islands, the Marianas, Puerto Rico, Panama and other small dots hard to find on the world map. Those economies do not have productive national agricultural, fishing and industrial systems and their goods and services for internal consumption are, for the greatest part, imported. The dollar, which eliminated its fixed value in relation to gold in 1971, is an unstable currency. The U.S. economy does not have gold reserves to guarantee the dollars spread around the world. They trust in an economy in crisis, characterized by the highest foreign debt in the world and the highest commercial deficit in the world, sustaining itself by issuing paper money of questionable value, backed by the military might of that great power. The lack of viability of the dollar as a world money is clearly expressed in the creation of the euro and the economic crisis in the United States. Dollarization of Ecuador is structurally infeasible and implies the transformation of the country into a dollar colony. The flow of foreign exchange dollars into the economy of Ecuador represents no more than 15% of the PIB, so the economy that today does not have at its disposal funds to import raw materials and consumer and capital goods has no real possibility of having dollars at its disposal for the functioning of production and daily existence, transforming those who hold dollars and financial speculators into the absolute dictators of the economy, causing an immediate recession in our productive capacity and in the short and long run bankruptcy and liquidation. The lack of dollars in the existing ratio between the magnitude of the GNP of approximately $20,000 million in 1998 and $l3,000 million in 1999, with a dollar flow of about $3,000 million, which furthermore depends on the unstable prices for oil and other export products, reveals the existence of a real dollar deficit that oscillates between 10,000 milllion and 17,000 million dollars a year. In view of this, the dollarization program proposed by Mahuad includes the utilization of all possible mechanisms to harness dollars: -The sale of PETROECUADOR and the entire oil industry, the electric services, telecommunications, raiding the savings set aside for those who are members of the IESS and those already retired, and privatization in general. -Oil factoring, which means the advance sale of oil reserves. -Assumption of title in order to sell the land, mines and oil fields. -Transformation of Ecuador into a center for financial speculation and laundering of narcodollars. -Aggressive increase in the foreign debt. The inability of the Central Bank to exchange for dollars all the currently circulating sucres implies that when the government arbitrarily sets the date by which this exchange must have taken place, millions of Ecuadorans who may not have exchanged their sucres will be left with paper of no value. Through dollarization Ecuador renounces its sovereignty over its monetary policy, freezing all its possbilities to the dollar and transferring any surplus to those who hold dollars and finally to the economy of the United States, which means that to renounce monetary sovereignty is tantamount to renouncing economic and national sovereignty, thus transforming the country into a colony of the dollar. Dollarization means that Ecuador would no longer have the sovereign power to issue money and it would be transferred gratis to the USA, with the real threat that an issuance by the United States of money with little real substance could purchase the entire nation. Dollarization entails de-industrialization of the country, by the transformation of productive investment into commercial and speculative investment, along with creation of mass unemployment. Dollarization chokes farm and cattle production and fishing destined for domestic consumption and favors the expropriation of small and medium sized parcels of land with their concentration in the hands of agricultural exporters, as agrarian production will be defined by demands of the foreign market. This process will lead to a systematic rise in prices on the domestic market, loss to rural and indigenous peoples of small and medium sized land parcels, over-exploitation of labor in the agricultural areas, impoverishment of the rural and indigenous peoples and globalization of hunger in both the rural areas and in the city. Internationalizing of prices, which is implied in dollarization, indicates that prices will be found at international levels, while the citizens' income will remain frozen at pre-existing international levels, condemning the whole nation to a drastic reduction in standard-of-living and driving retired people to absolute poverty or suicide. Along with this, we must add the already mentioned wave of financial speculation on the national market. PROPOSALS: The sub-committee proposes to the PARLIAMENT OF THE PEOPLES OF ECUADOR that, in accordance with the aforesaid, this body should: -employ its legislative powers and bring DR. JAMIL MAHUAD WITT to trial for assault on the national security upon proposing the destruction of State sovereignty, which constitutes high treason, -develop a document for mass distribution using political language and aimed towards fortifying the national uprising against dollarization and -designate a group of 3 or 4 members of Parliament to broadcast the position of the National Parliament through all means of mass communication. SUB-COMMITTEE MARCELO LARREA DIEGO ORDONEZ MARCELO ORTEGA JORGE LIZARZABURU FRANCISCO HUERTA JORGE LOOR ENRIQUE ASTUDILLO