Saturday, January 17, 2009

I really wish Ecuador had agreed to the new FTA with the USA

From the World Bank's Global Economic Prospects 2009: World Trade:
"On average, currencies of developing countries have fallen by 15 percent against the dollar, but high-income-country currencies (save Japan’s), have also depreciated. In general the competitiveness of the United States, Japan, China (whose currency has held steady versus the dollar), and those countries whose currencies have been pegged to the dollar will have been reduced; competitiveness for countries whose currencies have depreciated will be improved in these markets."
This looks bad for Ecuador. They rely on oil (now under $37/barrel), they use the dollar, in 2006 they destroyed their chances of entering into a bilateral free trade agreement with the U.S.A. (leading export market - 42% in 2007) anytime in the near future, and on December 31, 2008, the trade benefits they received under the U.S. Andean Trade Promotion and Drug Eradication Act expired.

Ecuador's Economy Minister may be denying that plans are in the works to un-dollarize Ecuador in favor of a new domestic currency, but I'm not buying his denial. I think the Sacagawea dollars are headed home to the U.S.A. by 2012.

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