- The speculation in this article has no documentary support and is not based on a fair analysis of the figures. The lack of accuracy, as well as its markedly political slant, and the intent to discredit the State of Ecuador by manipulating information and voicing a series of inaccuracies, is evident. This can be seen from the title itself, which speaks to an alleged “end of dollarization”, as if it were a fait accompli or imminent event, but instead is absolutely false. Over the years, certain columnists who share Mr. Vázquez- Ger’s point of view have repeatedly written about a supposed end to dollarization, without establishing a when or how. What these individuals seek to do is to frame the story, in other words, to continue to repeat the lie until people become convinced it is the truth.
- The so-called “transparent accounting system”, a balance of 4 systems, can be calculated every week and every month with the current, detailed information published by the BCE at the following hyperlink: http://contenido.bce.fin.ec/home1/estadisticas/bolsemanal/IndiceBMS.htm.
- The previous legislation required 100% backing of the first and second balance systems, and not of all BCE liabilities and equity, as the Vázquez-Ger states. As of May 2015, international reserves reached USD 4,568 million. Coverage for the exchange system requires USD 86 million (fractional currency) and coverage for the bank reserve system requires USD 2,910, million (total deposits from public and private financial entities). This means that the coverage required by the so-called “transparent accounting system” can be calculated and demonstrated with public information from the BCE.In fact, after backing fractional currency and all deposits from public and private financial entities, the BCE has USD 1,570 million to manage its remaining obligations, in addition to its total assets, which that add up to USD 8,968 million.
- Since February, 2013, the BCE has published the aforementioned balance systems’ coverage on its webpage on a weekly basis and without exception. At present, as demonstrated in the previous paragraph, the information continues to be available for whoever wishes to make this calculation.
- In terms of the explanation made by the author of the article regarding the backing of the dollarization within the Ecuadorian economy, he once again shows his lack of technical knowledge. By adopting the dollar as legal tender in Ecuador, the country ceased to have an International Monetary Reserve (IMR) given that its resources were used to exchange national currency held by Ecuadorians into dollars. In other words, the IMR was “distributed” since the year 2000 and became the currency in circulation for Ecuadorians. Unlike countries with their own currency, which need a considerable IMR to maintain the value of their national currencies stable, and a stock of currencies in order to finance their foreign payment demands, Ecuador has no such needs. With dollarization, reserves must be maintained at a level sufficient to guarantee payments abroad and the domestic demand for coins and banknotes. The truth is that dollarization can only be protected with better results in the balance of payments and greater efficiency in domestic liquidity management. Accounting schemes and formal rules can not achieve what economic results can.
- When the author talks of public debt, he overlooks Ecuador’s 32% debt/GDP ratio, one of the lowest in the region and in the world. However, in a biased and arbitrary manner, he manipulates figures to manufacture an alleged 200% increase and omits the fact that, regardless of any recorded increase, total debt does not currently exceed 32% of the GDP.
- With regard to the requirement for financial institutions to provide electronic money services, it is necessary clarify that, prior to said resolution, 8 banks and 62 other financial institutions were already providing cash-in and cash-out services to whoever decided to voluntarily activate an electronic money account. The purpose of this resolution is to incorporate the remaining financial entities as providers of these services (Macro Agents) at their branches. This means that if someone decided to voluntarily open and use an electronic money account on his/her mobile phone, he/she would be able to perform cash-in and cash-out operations, not only at the 70 financial institutions currently offering this service, but at all financial entities within the system, even more so when the Financial and Monetary Board ́s resolution determines that financial institutions must offer this service only to those citizens that wish to use this mean of payment. It should be pointed out that the aforementioned requirement is for financial institutions to provide services, however, citizens may use electronic money on a completely voluntary basis. All electronic money operations made with cash, or from at an available bank account balance, may only be carried out at the request of the account or cash owner. Additionally, it should be clarified that banks as legal entities, are not obligated to make or collect payments in electronic money either.
- As such, it is clear that the use of electronic money is completely voluntary. In fact, article 94 of the Fundamental Monetary and Financial Code sets forth the following: “Under no circumstance whatsoever can the State compel any natural person or legal entity to receive currency other than the United States Dollar,” which means the article’s speculations have no legal basis. The National Government and the BCE are committed to defending and supporting the dollarization monetary scheme, as has been repeatedly stated by the relevant authorities. This decision holds and is not up for discussion.
- As far as electronic money is concerned, article 101 of the Fundamental Monetary and Financial Code expressly determines that the aforementioned electronic money shall be circulated exclusively by the Central Bank of Ecuador (BCE) and backed by liquid assets, specifically based on the policies and regulations issued by the Monetary and Financial Policy and Regulation Board. Accordingly, article 3 of Resolution No. 005-2014-M clarifies that the BCE may only deliver electronic money in exchange for United States Dollars; and in turn, Administrative Resolution No. BCE-0122-2014, dated September 22, 2014, issued by the General Manager of the BCE, sets forth the following: electronic money must be 100% backed by assets with the same level of liquidity as those of the international reserves, and prohibits the delivery of electronic money in exchange for any other type of securities issued by public or private entities. In addition to these legal arguments, it would be ridiculous to believe that electronic money could finance the State, given that total Central Government income in 2014 was USD 20,380 million and the total electronic money balance up to May 2015 was USD 580 thousand. The latter’s balance is expected to reach a peak level of USD 80 million (4 million users with an average of USD 20 drawn on mobile phones) in five years, which is still extremely low compared to the Central Government’s income (0.39%). If compared to international reserves (USD 4,568 million up to May 2015) electronic money would represent 1.75%, an amount that is easily covered by international reserves. Clearly, the author’s speculations regarding the law, the documents, and the figures are absurd.
Finally, his fanciful comparisons with Argentina, at the beginning of this century, are not based on clearly defined situations or on comparable magnitudes. The author seems to base his argument solely on his ideological bias only and on his clear need to disparage any economic policy that is contrary to the private interests he is protecting.
