Ecuador Exchange Rates and Politics

Sorry, this post doesn’t have any pictures

USA / Ecuador Exchange Rate

Ecuador replaced their Sucre currency with the dollar about 10 years ago, so of course the official exchange rate is one for one. Exchange Rates However there is a significant difference in the costs of things.  Generally labor is cheaper in Ecuador and imported stuff is more expensive.  Below are some examples.  Obviously the numbers are not precise, but they give an idea:

One point here is that generally “exchange rate” means that goods and services cost more in one country relative to another.  Although the exchange rate with Ecuador is one-one, goods and services may cost more or less depending on what you’re buying.

The other point is that people are paid significantly less, but the cost of living is also lower, unless they try to buy imported goods.

Politics

The following is written based on talking with numerous people.  Some of it doesn’t make sense,  but it’s our best understanding.

The current Ecuadorian president,Correa,was voted in on a Socialist platform, promising to take from the wealthy and give to the poor.

Our understanding is that when he took power he did the following:

  • Told the foreign oil companies that they’d need to start paying 80% of profits to the Ecuadorian government, rather than the 20% they’d been paying.  One company left, all the others stayed.
  •  Began enforcing tax collection aggressively.  We see restaurants and shops with posters over the doors saying that they’ve been closed due to incomplete record keeping or failure to collect and deliver the 12% Value Added Tax that applies to almost everything.
  • Undertook a major highway and road re-building initiative.
  • Upgraded the entire bus system.
  • Free medical care was put in place.
  • Replaced the Congress with a “constitutional assembly”, and a system for letting the people vote on major issues.  The idea was that congress was corrupt, and didn’t get anything done. (sound familiar)
    • The issues which were put to the vote, and passed were the following.  (By the way, every adult between the age of 18 and 65 is required to vote)
      • Eliminate casinos and gambling.
      • Eliminate all activities that involve cruelty to animals such as bull fights, cock fights, and dog fights.
      • Elimiinate all alcohol sales on Sundays.
      • The President shall sit no more than two terms.
  • Things are less clear about the dissolved congress and the assembly that replaced it.  Our understanding is that an Assembly was convened to re-write the constitution.  People voted for Assembly representatives.  The original idea was that the assembly would only be convened occasionally for major issues, but it appears that they stayed on after re-writing the constitution.   The sense seems to be that the Assembly does whatever Correa wants done.

So how’s it going?

We’re told that polls indicate that 70% of the people support Carrea, and this seems pretty consistent with our discussions with citizens.  Most taxi drivers and others of lower income strongly support Carrea.  They feel their lives are significantly better.  Personally, I’m not sure they distinguish the improvements which came about due to the shift from the Sucre to the dollar during the prior administration, and how much is due to Correa’s leadership.  The more affluent people resent having to pay taxes.  They wonder why the oil revenues aren’t sufficient, and they suspect that money is going into the pockets of Correa and his friends.

As mentioned earlier, free speech seems to be controlled if not suppressed.

It will be very interesting to see what happens in two years when Correa’s second term expires.  Will he use his powers to extend his control, despite the pubic’s vote to limit Presidents to two terms?

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