Ecuador: US-Backed Govt Scrambles to Privatize the Central Bank Before
Elections
An emergency law dubbed the Humanitarian Support Organic Law would
lockdown Ecuadors central bank, siphon it from the public sector, and
place its financial sovereignty at the whims of private interests under the
guise of saving the country from de-dollarization.
by MintPress News Desk
February 05th, 2021
By MintPress News Desk
This article was written and researched for MintPress by a talented new
collective of journalists that call themselves Ecuador On Q. You can find
more of their work on Twitter at @Ecuador_On_Q, or visit them on Patreon.
With just days until Ecuadors February 7 presidential election and four
months remaining on President Lenin Morenos mandate, the Ecuadorian
government and right-wing elites are still scrambling to privatize the
countrys central bank.
The process involves fast-tracking an emergency law dubbed the Humanitarian
Support Organic Law, which will lockdown the central bank, siphon it from
the public sector, and place Ecuadors financial sovereignty at the whims of
private interests.
According to right-wing figures and the countrys mainstream media apparatus
that protects and serves its interest, the unconstitutional move is being
touted as a necessity. Both parties have claimed that the measure would
safeguard the countrys dollarization. In 2000, the U.S. dollar was
implemented as part of the countrys national monetary system during the
neoliberal administration of Jamil Mahuad. Sixteen financial institutions
were bailed out by his government at a whopping cost of $2.6 billion.
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Ecuadors dollarization occurred just months after the infamous bank
holiday, in which 70% of all banking institutions declared bankruptcy,
hurling the Andean Republic into its worst economic crisis in a century.
Millions of people lost their life savings during the chaos and the former
national currency, the sucre, plummeted in value by 195%.
A migrant crisis accompanied the economic downturn. More than 267,000
Ecuadorians fled the country during a two year period (1999 and 2000),
eventually leading to a total of 2.2 million Ecuadorians migrating, a figure
that at the time represented nearly 20% of the countrys population. Even
more lost their life savings. The middle class was obliterated and
inequality worsened.
The current claim that the countrys dollarization needs to be
safeguarded, a claim repeated by the political and economic elites, local
media, and the bulk-some of the 15 presidential hopefuls, is rooted in the
work of the leading presidential candidate, Andrés Arauz.
Since the end of Rafael Correas term in office, Arauz has been in charge of
the Dollarization Observatory. This organization informs the public on
economic matters, often focusing on the ways in which neoliberal interests
threaten Ecuadors economy. The myth claiming that Arauz wants to forcibly
remove the dollar as the national currency comes from an article he wrote
last April in which he gave examples of good and bad de-dollarization
processes. Opponents of the front-running presidential candidate seized on
the chance to criticize the piece, claiming that Arauz intends to withdraw
all U.S. dollars from circulation. Though the dollarization of the economy
was, indeed, a bad idea at the time, Arauz has not expressed nor has any
intentions of de-dollarizing the economy.
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The privatization of the central bank, however, will put a dollarized
economy at risk, as it would open the floodgates for billions of dollars to
be transferred to places like Panama and other tax havens. It would, in
effect, force an already crumbling public sector to subsidize the capital
flight.
The emergency law would also prohibit the central bank from issuing bonds to
the government, forcing authorities to increase the foreign debt during the
current economic and health crisis.
The law would also completely disassociate Ecuadors principal financial
institution from any government oversight. Consequently, a board of
directors named by Moreno, a president with a 7% approval rating and who has
co-governed alongside powerful economic groups, will be charged with this
responsibility. Uncontested authority over the central bank and its economic
policies will be wielded by the board and private interests.
A requirement to fulfill an International Monetary Fund financial package,
the emergency law would institutionalize current austerity measures and
solidify the inequalities that were aggravated by the COVID-19 crisis.
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With a recent Comunizaliza poll showing Arauz not only in the lead but
commanding a decisive first-round victory, Ecuadors right-wing minority are
trying to pre-emptively cripple a progressive government no matter who bears
the brunt.