Ecuadorian parliament approved law to protect dollarization

The Ecuadorian Congress on Thursday approved a bill sent by the executive to protect the dollarization implemented in the country in 2000 and which is in line with the country’s commitments to the IMF.

With 86 votes in favor, 41 against, one goal and 7 abstentions, the National Assembly gave the green light to the so-called dollarization defense law, which had been rejected twice by the Legislative Administrative Council due to shape problems..

The document will be sent to President Lenín Moreno, who must sanction or oppose the law.

Ecuador dollarized its economy in March 2000 due to a banking crisis that left the state with losses estimated at over $ 5,000 million.

“It’s good news that @AsambleEcuador has approved the dollarization defense law. The reserves of the @BancoCentral_Ec (Central Bank) are protected, the citizens’ deposits are secure, the entity regains its autonomy “, wrote the Minister of the Government (Interior), Gabriel Martínez, on Twitter.

The creation of this law is part of the commitments made by Ecuador to the International Monetary Fund (IMF), which in September approved a 27-month loan for Ecuador under the Extended Service Fund (SAF), for some $ 6,500 million.

The loan supports a reform plan with austerity and anti-corruption measures in the country.

The Assembly “has taken a very important and fundamental step to defend economic stability and dollarization”, Finance Minister Mauricio Pozo also celebrated on Twitter.

The rule establishes that the Central Bank of Ecuador (ECB) will have “the necessary autonomy” and that its decisions will be based “on exclusively technical criteria,” Congress said in a statement.

It also prohibits the ECB from using its international reserves to inject resources into the government.

“Never again will a government use it (the ECB) as a petty cash,” Martínez said.

On the other hand, the law provides that a financial regulation council will define a system of maximum interest rates for bank loans.

During the debate, developed by the Internet, Supporters and detractors of the law have warned of the benefits and risks of the regulation, the approval of which is tied to the $ 6.5 billion loan deal that the Ecuadorian government signed with the International Monetary Fund (IMF).

One of the biggest debates has taken place around the return of political and financial autonomy to the Central Bank and which, according to those who defend it, will guarantee the stability of the economy and strengthen the country’s financial policy, although critics consider it a “privatization” of the said institute.

According to a report of the debate, released by the Assembly, supporters of the project indicated that Regulation will improve the structure of the Central Bank, strengthen dollarization, it will generate greater liquidity, attract investment and promote transparency in the management of the financial system.

Opponents, on the other hand, warned of possible unconstitutional biases in the regulation, which opens the possibility of capital flight and stressed that the stability of dollarization does not depend on the international monetary reserve, but of the balance of payments.

(With information from Europa Press)

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