Ecuador is in intensive care, and a straitjacket- The Economist – The Amazon Post

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Ecuador is in intensive care, and a straitjacket- The Economist

Date: Jul 6, 2020

At the start of the covid-19 pandemic in Latin America in March and April, Ecuador offered the world Dantesque images of dead bodies dumped in the streets of Guayaquil, a tropical port that is the country’s largest city. The outbreak has eased, but it is not over. After the government relaxed its lockdown last month cases picked up, especially in Quito, the capital. That is happening elsewhere in the region, too. But Ecuador faces additional difficulties.

One is that the centrist government of Lenín Moreno, the president since 2017, was economically and politically weak even before the virus struck. Another is that since 2000 Ecuador has lacked its own currency, using the American dollar instead. That switch was the consequence of hyperinflation and a previous economic crisis. It has brought a degree of stability. But it means that when recession strikes, Ecuador cannot print money. Nor can it easily borrow because Mr Moreno’s populist predecessor, Rafael Correa, piled up debt during his decade in power, which the government has struggled to repay. So while governments elsewhere are loosening the purse-strings, Ecuador has to cut public spending just when it is most painful to do so.

To read the full article on The Economist, click here.