Ecuador’s experience with dollarization matters beyond Quito. The possibility of mothballing local currencies and replacing them with the dollar is a hot topic in Latin America. It’s also on the agenda in Washington, D.C., where there is renewed interest in promoting the use of the greenback.
Ecuador is an ideal natural experiment in how a dollarized system holds up against a hostile government. Rafael Correa, who holds a PhD in economics from the University of Illinois, opposed dollarization before it was adopted in Ecuador and before he became president. He led the country for a decade but could not dismantle Ecuador’s dollarized system because it produced excellent results and garnered widespread public support.
