Known in Ecuador as “the mother of dollarization,” Joyce Ginatta is
an unlikely shaper of monetary policy. A grandmother of 12 and a
self-made businesswoman – she made most of her money importing
bathroom fittings from the US – the closest she has come to public
office is her role as president of the Chamber of Small Businesses
in Guayaquil. Yet driven by her exasperation at the frustrations of
doing business in a high-inflation, unpredictable economy, and
armed with real flair for handling the media, she led a crusade
that most in Ecuador agree was ultimately responsible for tipping
the country into dollarization in early 2000. “She’s a real opinion
former, and she sure knows how to get things done,” says Francisco
Zalles, Guayaquil representative of Van Eck, a US investment fund.

Ginatta began trying to knock sense into the government as early as
1995, when the cost of the border war with Peru sent inflation
soaring. “I called on the president to devise a macro plan to save
the economy,” she says. “Nobody paid any attention, so I did a plan
myself.” She presented it to the nation by persuading the country’s
main newspapers to carry it on their front pages. It caused a
public stir, but not much reaction in government. Nevertheless,
Ginatta was heartened when the incoming president, Abdalá Bucaram,
announced plans for an Argentina-style convertibility plan; but
Bucaram was thrown out of office in a corruption scandal in
February 1997 before his plan could be implemented. That was when
Ginatta began her campaign in earnest.

Pride and Prejudice
Her ebullient personal style and Margaret Thatcher-like charisma
made her a frequent guest on TV shows and other public platforms.
She took every opportunity to drive home her message: that Ecuador
should “throw the sucre in the river” and take up the US dollar.
Most politicians were dismissive. “They said you have to be a woman
to be so stupid,” she recalls. “They thought we would lose our
sovereignty and become slaves of the United States.”

      
Joyce Ginatta

Among those who dismissed the idea of dollarization was the
new president, Jamil Mahuad. But in late 1998 Ginatta organized a
series of high-profile debates under the title “Convertibility,
Dollarization, or What?” Opinion began to shift. By now, a number
of influential economists – among them Carlos Julio Emanuel, the
current economy and finance minister – were also arguing in favor
of dollarization. Their arguments gained force as the sucre went
into free fall during 1999. Former President Bucaram had proposed
launching convertibility at a rate of 4,000 sucre to the dollar. By
June 1999, the rate was 12,000. With the economy reeling under a
series of shocks including the low oil price, depleted banana crops
and the white spot shrimp virus, banks were bailing out businesses
and the government was bailing out the banks, printing money as
fast as the presses would run. In the first week of 2000 the sucre
devalued by 25%, reaching a rate of 25,000 to the dollar.

On January 9, 2000, Mahuad called for a nationwide television
address. According to one economist with close links to the
government, he was planning to resign; but hours before the
address, political and business leaders told him that if he adopted
the dollar, they would support him. Whether or not that’s true,
Mahuad’s announcement took the country – not to mention the US –
completely by surprise. Not everybody was won over. Twelve days
later an ad hoc coalition of indigenous groups and army officers
ousted Mahuad from office. But in a spirit of national conciliation
Mahuad’s vice-president, Gustavo Noboa, was sworn in as his
successor, and ratified the decision to dollarize.

It had not been done well, but at least it had been done. The least
positive aspect was the exchange rate at which dollarization took
place. There is little doubt that the free-falling sucre had
overshot. Many people’s savings had been stripped of up to 60% of
their value. The bloated exchange rate also meant that prices were
abnormally high, one reason why inflation was more than 90% during
the dollar’s first year. This was a one-off shock that has
gradually been absorbed, and inflation is now heading for single
figures. If all goes well, the temporary disadvantages of
dollarization will soon be forgotten in favor of its long-term
benefits. It was a chaotic beginning, but a good one nonetheless.