Little Easing Is Seen as Ecuador Devalues --- Critics Complain Congress Must Pass Tax Measures To Steady the Economy
Ecuador's move to devalue its currency for the third time in less than a year will ease pressures on the nation's floundering economy -- though not by much, given the failure of the nation's Congress to pass badly needed tax measures.</br></br>It was this failure last Thursday that precipitated the resignation of respected Finance Minister Fidel Jaramillo and the move by the Central Bank to allow the sucre to float on Friday morning.</br></br>"The president has his hands tied," said an analyst at Multiplica Cia., an economic consulting firm in Quito. "Congress isn't helping him."</br></br>The sucre dropped 3.6% on Friday to an interbank midrate of 7,580 sucres to the U.S. dollar from 7,305 sucres on Thursday. Since the end of 1997, when the sucre was at 4,430 to the dollar, it has lost more than 41% of its value.</br></br>The Central Bank couldn't hold out after losing nearly $300 million of its reserves over the past month as local investors rushed to swap sucres for dollars. Ecuador's economic activity also was being choked by short-term interest rates in the triple digits. The Central Bank sharply boosted the overnight interbank lending rate in January in an attempt to slow the flight of dollars after Brazil floated its currency. Friday the Central Bank lowered the rate to 95% from 140%.