During the transition, both dollars and sucres circulated as legal tender, at an official exchange rate of 25,000 sucres to the dollar. Ecuador joins Panama as the only Latin American countries using the US dollar as the official currency. In at least nine other countries around the world, the dollar is accepted as legal tender. Officials hope the switch will end record inflation, which is running at 104 percent a year, the highest in Latin America. The step is designed to prevent the government from printing money excessively to meet its budgetary needs.
Economists attribute Ecuador's economic woes to decades of deficit spending.
So far, signs indicate that the plan is working. Monthly inflation has plunged from 14.3 percent in January to 1.4 percent in August. Last week, the Central Bank began distributing coins freshly minted in Canada and Mexico in amounts equivalent to the US penny, the nickel, the dime, and the quarter. Ecuador has followed Panama's example in using US bills but is minting its own coins. But the new coins, for the most part, are circulating only in large cities.