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Tuesday, 20 February, 2001, 14:02 GMT
Ecuador adapts to the US dollar
Ecuadorean and US coins
By the BBC's James Reynolds

The world may be watching and waiting to see how the single European currency will work.

But parts of Latin America are already headed towards their own version of monetary union - dollarisation.

Street scene in Quito
Some Ecuadoreans find the new currency confusing
Argentina is pegged to the dollar. Panama has the dollar. El Salvador is about to adopt it.

Last year Ecuador dropped its currency and took up the dollar.

Water pistols and buskers

In Ecuador, a boy sells water pistols on the streets of the capital Quito for 50 US cents. A few months ago his asking price would have been 12,000 Ecuadorian sucres.

Street buskers play to passers-by. The hat on the ground in front of them is filled with collections of dimes, nickels, quarters and a few dollar bills.

This is the evidence of the Ecuadorian government's latest economic experiment and boldest attempt yet to try to beat inflation and bring about economic stability.

The country's industrialists have welcomed the move. But trade unions and indigenous leaders have criticised it.

It has all happened in less than a year - start to finish.

Too early to tell

Economists say it is too early to tell whether the move was a success or not.

Carlos Ariza from the Central University of Ecuador in Quito said: "Ecuador is basically a guinea pig.

"We will have to wait until the end of the year to find out whether it has been successful and whether dollarisation has managed to help the economy."

Ecuador's Amazon region is one of the country's most remote areas. Yet even here, there are no sucres left.

Very confusing

Selling a cup of fruit juice from a stall at the side of the road, Pedro and Gladys said they were against the introduction of the dollar:

"It's very sad. We were so very used to Ecuadorian money. We knew what it was worth - how to use it and so on.

"All these new coins are very confusing. You have got to spend so much time figuring it all out."

A few blocks away Carlos sells coconuts. He is equally confused by the dollar.

"It is difficult because you have to work it all out. I now charge 20 cents - so what is that in sucres? You are always having to do the calculation. It has made it pretty tricky to remember."

Some sovereignty kept

Although Ecuador has given up its currency it has managed to keep some sort of sovereignty over parts of its money because of what it has done.

The central bank has minted coins which are cents so when you pay for things you have to pay in US dollars - the notes - but the coins you get back will sometimes be Ecuadorian.

But this may be small consolation to those who feel they've given up control of their currency.

The Ecuadorian experiment is being watched closely by the rest of Latin America and also by the United States.

If the experiment works, other countries in the region may look to drop their respective currencies and follow Ecuador's example in taking up the US dollar.

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See also:

08 Feb 01 | Americas
Accord follows Ecuador fuel protests
09 Sep 00 | Americas
Ecuador switches to US dollar
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