Ecuador’s one and only official currency is the US Dollar
Ecuador began using the US Dollar as its official currency in the year 2000.
There is no other official currency in Ecuador, all prices are in US Dollars.
Some Ecuadorean coins exist for small amounts less than one dollar.
Ecuador and the US have a somewhat complicated relationship, from past disputes over US military use of Ecuadorian airports, to the recently ended harbor of Julian Assange in an Ecuadorian embassy, to disagreements about support for neighboring South American regimes. Yet one curiously cooperative arrangement between the two countries is Ecuador’s adoption of the US Dollar as the country’s one and only official currency. Ecuador’s initiative to dollarize it’s currency in 2000 is an interesting example of a country deciding to adopt another country’s currency as its own. I tried to find out more while visiting this South American country of nearly 17 million people.
Ecuador is not the only non-US territory that currently uses the US Dollar (Panama, El Salvador, and Zimbabwe are some other examples), yet each country that has adopted the US Dollar manages the details a bit differently. Some of the distinctive features of Ecuador’s usage of US currency include the following:
Ecuador has no other official currency
Ecuador’s use of the US Dollar is a government-sponsored initiative
Ecuador has its own minted coins in amounts lower than one US Dollar (which are used interchangeably with US coins)
Informal US Dollar usage in Ecuador pre-dates the official dollarization initiative in 2000. Prior to Ecuador’s official adoption of the US Dollar, inflation and instability of the Ecuadorian Sucre were already causing Ecuadorians to lean on the US Dollar as a secondary currency. With the instability of the Sucre beginning to threaten Ecuador’s economy, Ecuadorian president Jamil Mahuad, a Harvard graduate, implemented an initiative to officially switch Ecuador to the US Dollar. With a hard-peg conversion rate of 25,000 sucres to one dollar, Ecuador began it’s transition, which has overall been considered successful in stabilizing the country’s inflation problem. The US played a cooperative yet minor supporting role in the transition, but the switch was largely executed by Ecuador on its own.
Americans in Ecuador will likely notice some interesting monetary differences between Ecuador and other South American countries, as well as some differences from how the US uses its dollars. First, it is far cheaper for Americans to get cash in Ecuador than it is in Ecuador’s neighboring countries. There is of course no currency conversion fee, and withdrawal fees in general are far lower (these fees can add up in some neighboring countries, where withdrawal limits are low). Another difference from Ecuador’s neighbors is that Ecuador’s prices are comparatively higher. Locally produced goods (baked goods, produce, etc.) tend to be more expensive than in the rest of South America, but cheaper than in the US, while imported goods such as electronics are significantly more expensive than in the United States (this is due to non-currency driven reasons).
Another interesting difference from US usage of the dollar is the more prevalent use of coins. Ecuadorians generally do not use one-dollar bills, they use one-dollar coins (the gold-colored coins that the US began minting in 2000 are very popular). These coins last longer than paper one-dollar bills, so this added durability is helpful in a country that does not mint its own currency. Fifty-cent pieces (the JFK coins) are also more commonly used than in the US. Interestingly, for amounts less than one dollar, Ecuador has its own equivalent coins that are still denominated in USD. These American and Ecuadorian coins in amounts of 50, 25, 10, and 5 cents circulate side-by-side in Ecuador. US pennies are also in common circulation, yet while Ecuadorian pennies do exist, they are uncommon, and I was unable to locate any examples from local merchants (despite my efforts).
I talked to Toni, a local business owner in Cuenca, Ecuador, about what it was like before, during, and after Ecuador’s transition from the Sucre to the US Dollar in 2000.
“In 2000, the Sucre started off at about six thousand Sucres to the dollar, and it ended the year with twenty-five thousand sucres to the dollar…It got to the point where if you bought something today for one price, and tomorrow it would be [priced higher].”
Toni explained that people in Ecuador had been informally using dollars more and more, and that there was a lot of uncertainty and speculation going on regarding the exchange rate. Some businesses (especially hotels) began only accepting US Dollars.
“When they finally decided that we were going to do the dollar, they froze the exchange rate at twenty-five thousand.” Toni said that subsequently, sucres and dollars were circulated concurrently while the Central Bank of Ecuador worked together with consumer banks to remove sucres from circulation by exchanging them at the fixed rate.
Toni explained the effect that the conversion had on prices. “Let’s use an example like an apple. If an apple cost you ten thousand sucres, [forty cents]…All of sudden, people in the market started charging a dollar. You had to explain to a lot of people, especially in the market, and then they would lower the price back down.”
“Even today, when you walk around and ask to buy something, the first thing they do is quote you for a dollar. They might not just give you one apple for a dollar, they give you two or three apples, but it’s a dollar.”
He mentioned that overall, low-cost goods significantly increased in price, while wages remained stable based on the 25,000 sucre-to-dollar exchange rate. The increase in costs for everyday purchases was difficult for a lot of people.
I asked Toni about the common usage of dollar coins in Ecuador. “The handling of the money, especially the dollar since it’s the most frequently used bill, it just gets old and torn all the time, so people prefer the coins. That way you don’t have to worry about if you put it in your pocket, that it’s going to get torn.”
Toni mentioned that Ecuadorians took a particular liking to the Sacagawea coin. “It was easy to adopt into Ecuador, because on the back of the coin [is] Sacagawea. When people look at it, they assume that it’s an Ecuadorian indigenous woman.” Toni even mentioned siome confused perceptions from Americans in Ecuador. “I’ve actually had Americans say to me ‘This is not an American coin, look at the Ecuadorian woman on the back.’”
I asked if the use of the US Dollar causes any other confusion or unique difficulties. Toni mentioned that the international wire transfer systems for a long time still had Ecuadorian transactions listed in sucres, but that now it’s well established that Ecuador uses the US Dollar. Visitors from Europe are usually the most surprised by Ecuador’s use of the US Dollar; whereas Americans quickly accept Ecuador’s use of the US Dollar since it’s just like home.
Overall, Ecuador’s use of the US Dollar works, and does not appear likely to change anytime soon. There were previous discussions by Hugo Chavez about Venezuela and its neighbors, including Ecuador, establishing a South American currency (similar to the Euro). However, talks of a South American currency union seem to have ended when Hugo Chavez died in 2013. Here in Ecuador, the US Dollar is here to stay, and Sacagewea has made herself a second home on the equator.