Note that neither currency nor derivatives speculators have been accused here.
Not that an ignorant journalist, politician, economist,...couldn't jump in &
look for a convenient scapegoat! Most leaders are smarter and better informed
than the Pres. of Malasia IMHO. ( re honesty of them any I can't opine)
It certainly is debatable whether the chosen medicine is worse than the disease.
The IMF and World Bank have recently questioned austerity and high interest
rates as cure tactics. Russia (with Harvard prof Jeffrey Sachs a key
advisor)endured similiar 'medicine'.
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March 13, 1999
Ecuador, Swept by Inflation and Unrest,
Brakes the Economy
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By LARRY ROHTER
IO DE JANEIRO, Brazil -- After a two-day strike that paralyzed
commerce in Ecuador and sparked clashes between security forces
and demonstrators, Ecuadorans awoke Friday to find gasoline prices
more than doubled, many of their bank accounts frozen and the
country's
politics still in turmoil.
President Jamal Mahuad announced a sweeping austerity package late
Thursday, after the general strike, which was called by labor unions,
opposition parties and student and indigenous groups.
At least 235 people were arrested in skirmishes between demonstrators
and 15,000 soldiers and police officers who were mobilized after the
government declared a 60-day state of emergency on Tuesday.
Ecuador's 39 commercial banks, the targets last week of huge
withdrawals by depositors who feared the banks were on the verge of
collapse, remained shuttered Friday for the fifth consecutive business
day.
Mahuad promised they will reopen Monday, but imposed severe
restrictions, limiting withdrawals to 50 percent of most checking and
savings accounts and freezing the remaining funds for up to a year.
"Confronted with this crisis, I could have done what many have done:
nothing," Mahuad said in a televised address to the 12 million
Ecuadorans. "But you elected me to do the right thing, not to choose
the
easy way out."
Among the other austerity measures he plans is an increase in the
value-added tax to 15 percent, from 10 percent, a measure that has
drawn strong opposition.
The strike was called in an attempt to force Mahuad, a former mayor of
Quito, the capital, to rescind earlier austerity moves that froze
salaries of
public workers and ended subsidies on gasoline and other fuels.
But as the left warned of further protests, conservatives took a
different
but equally disenchanted view. Mahuad's chief aide, Jaime Duran, had
promised "a move toward a radically different economic model," but
business leaders said the government's measures were both misdirected
and fell well short of what was needed.
"The president has wasted our time," Joaquin Zevallos, the president
of
the Federation of Chambers of Commerce, said Friday. "You do not
build a country with more price and tax increases."
Mahuad, 49, a Harvard-educated lawyer, took office last August,
inheriting what he acknowledges is Ecuador's worst economic crisis
since
the Depression:
-- El Nino has inflicted over $2 billion in damages on the country.
-- The price of oil, the principal export, is sharply lower.
-- Ecuador's 1998 inflation rate, 43 percent, was the highest in Latin
America.
Since January the value of the sucre, the national currency, has
fallen in
dollar terms by more than 40 percent, with most of the decline
occurring
last week.
The minister of finance, Ana Lucia Armijos, said Friday that the worst
may yet be to come, at least as regards inflation. "These are measures
aimed at prices, and there is going to be a spike in prices before the
inflation rate starts to slow down," she said in a radio interview.
There had been much speculation before the president's speech that he
might follow the path taken by Argentina and decree either parity
between
the sucre and the dollar or outright dollarization.
He did not take either step, but said "it is possible" he may do so
later,
though only if he succeeds in implementing his reform package swiftly.
Copyright 1999 The New York Times Company
--
"To teach how to live without certainty, and yet without being
paralyzed by hesitation, is perhaps the chief thing that philosophy,
in our age, can still do for those who study it."
Bertrand Russell, "A History of Western Philosophy"
