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11 March 1999

Demonstrations as Economy Hits the Skids

Thousands of Ecuadoran teachers, students and workers demonstrated in the first week of March to protest plans for privatization and austerity measures by the government of president Jamil Mahuad. Workers rallied in front of the Congress building in Quito on Mar. 3 to oppose increases in oil prices, while students burned Mahuad in effigy. Teachers marched through the streets of Quito to mark the 30th day of a national strike for higher wages. [El Diario-La Prensa (NY) 3/6/99 from AFP; Hoy (NJ) 3/4/99 from AP]

The Unitary Workers Front (FUT) has announced a national general strike for Mar. 10 and 11 to protest the government's economy policies. FUT president Fausto Dutan says this "will be just one of the protests that have been planned, since we've decided to undertake a struggle in stages." [ED-LP 3/7/99 from EFE]   French news service Agence France Presse (AFP) describes the situation as "the biggest socio-economic challenge for an Ecuadoran president in 70 years." [ED-LP 3/5/99 from AFP] The Ecuadoran economy "is in very dire straits," according to Michael Henry, an economist for ING Baring in New York. More than 40% of the government's current budget is earmarked for servicing Ecuador's external debt of more than $13 billion. Ecuador's total foreign reserves are at about $1.4 billion, giving it little leeway for debt repayment. On Feb. 12 the Central Bank allowed the sucre to float in the currency's third devaluation in less than a year; it immediately fell by 3.6% to 7,358 to the US dollar. [Wall Street Journal 2/16/99]

The sucre plunged by another 14% on Mar. 3, the day after President Mahuad went on television to describe a new package of spending cuts, including a reduction of severance payments for fired public workers. The sucre has fallen by 52% since June 1998. Also on Mar. 3, Ecuador's deposit guarantee fund took over Banco del Occidente because of liquidity problems; it is the seventh financial institution the government has taken over in the past year. A mission from the International Monetary Fund (IMF) arrived in Quito on Feb. 28 for discussions. The government is looking for an IMF loan of up to $400 million, with another $300 million from the World Bank and the Inter-American Development Bank. [WSJ 3/4/99; Financial Times (UK) 3/4/99]


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