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Ecuador Head Fixes Exchange Rate

January 10, 2000

QUITO, Ecuador (AP) _ Ecuador’s president sought to stabilize the nation’s plummeting currency by pegging it to the U.S. dollar, despite opposition from the central bank.

Amid calls for his resignation and a worsening economic crisis, President Jamil Mahuad also announced late Sunday in a 20-minute televised address to the nation that his 15-member Cabinet had tendered its resignation. He said he would name replacements in the coming days.

A deal was hammered out with Congress to pave the way for approval of several economic reforms, he said, including ``the modernization of the state″ _ a term interpreted by many to mean the privatization of state industries.

Mahuad said he was fixing the value of the sucre at 25,000 to the U.S. dollar to halt its devaluation, after the currency plunged 20 percent in less than one week to 29,000 sucres.

One year ago, the sucre was valued at 7,000 to the U.S. dollar.

Mahuad’s announcement came after a tense week of street protests calling for his resignation and rumors that Ecuador’s military was planning a coup.

The military high command issued a statement Saturday expressing support for Ecuador’s democratically elected government.

Mahuad said the decision to fix the exchange rate was the result of two months of government deliberations. Ecuador’s Central Bank has opposed the move.

He warned that he would call a special session of Congress on Tuesday to fire any Central Bank executives who tried to block the measure.

For the last six months, the Harvard-educated Mahuad, a political centrist, has faced increasing calls to step down from political rivals on both the left and right, as well as business and labor leaders who accuse him of incompetence in handling Ecuador’s economic crisis.

Several leftist-led organizations demonstrated on Thursday in Ecuador’s main cities to demand Mahuad’s ouster. Police used tear gas to disperse 1,000 demonstrators who tried to march on the presidential palace, and the government called a state of emergency, giving the armed forces authority to maintain order and detain protesters.

More protests are planned for this coming week.

Update hourly