Electronic money & will it eventually devalue your dollar?

Cuenca boy wrote:

Banco Central  http://www.dineroelectronico.ec....you will see their #1 reason is to let poor people and women have access to money transfer or to pay with the cell phone.. If the poor do not have access to a bank maybe it is because they only want to deal in cash. How many in poverty even have phones?

If I was in their targeted group -- citizens without bank accounts -- I'd just keep using cash for a while until I was satisfied on two fronts:

1.  That my fellow citizens who participate in the roll-out are as protected from hackers and cell-phone thieves as the "Proteger" web page contends.

2.  That the participants are getting enough on-going value from the e-Money that it's worth the trouble of going through the steps.

From the point of view of this targeted group, the benefits will have to be compelling, with no perceived risks.  Why buy a cell-phone, pay 15-cent usage fees and mess with the bureaucracy, when using cash is so easy and familiar?

cccmedia in Quito

cccmedia wrote:

Why buy a cell-phone, pay 15-cent usage fees and mess with the bureaucracy, when using cash is so easy and familiar?
cccmedia in Quito

Exactly the reason it will not work

smell the roses wrote:

I agree with so much in this post. For even more security and peace of mind Banco Pichincha is the oldest and largest international bank in Ecuador. When there was a financial crisis and some of the banks went under Pichincha was able to buy their assets. They only pay 4.5% interest on investment visa cds but return of principal is more important than return on principal.

Have you taken a look at Pichincha's financials of late, especially bad debt on books? I would better recommend Banco Internacional, Banco Bolivariano or ProduBanco.

smell the roses wrote:

I'm not negative about the future here. I was just talking to a local today about the future of the dollar here. His opinion is that the dollar is not going to be replaced and that the new electronic currency will remain backed by the dollar. I have read that President Correa does not like having the economy tied to the dollar. Since he is an economist he understands the constraints the dollar provides on the govt. control of the economy here. Of course, he would have more options in stoking or cooling the economy here if it wasn't dollarized. But, I think everything in Ecuador has improved so much since he took office and the dollar was implemented that he can't drop the dollar. The locals give Correa a lot of credit for the improvements here but also relate it to dollarization. The gentleman I was talking to today also says that the locals were always confused with the sucre when its value fluctuated against the dollar. Correa has been quick to react to the drop in oil prices and the strong dollar by cutting the budget and raising import taxes. While some of this may have been too aggressive, he seems willing to adjust his approach quickly when the results aren't what he expected. Good intentions combined with the ability to change your approach when conditions change are a good recipe.

Having the dollar as the national currency definitely restricts what Ecuador can do to a certain extent. Both pros and cons to dollarization. Do the pros outweigh the cons, or vice versa? Tend to believe the pros outweigh the cons. It's a tough call to say which way the economy, and future of Ecuador will go?
Realistically, think you could make a fairly strong case no matter which side of the coin you're on. So many things can happen that swing things in one direction or the other. People want things to be black, and white, but they rarely are. Clearly there is some glaring challenges facing Ecuador's economy, and future at this time. Life is always about evaluating, adjusting, and adapting to the current environment. Time will tell how Ecuador will fare in that regard.

Cuenca boy wrote:

You are "informed"!! right on analogy!!! This site needs more like you that take the time to get informed!!

Many authors (not just posters on this blog) are stating to all of us that what the government says and what it may do can and often are two different things.  Don't swallow hook, line and sinker what you've read from government news releases. Folks are quite astute to see the potential misuse of electronic funds by the government in a USD denominated economy.  You might be a bit naive.

Cuenca boy wrote:

Naive?? Maybe you are paranoid! The system is defined as a "pay as you go".  Cash!! You could post a doomsday idea, but this is a well run government in Ecuador. Granted. Anything might happen but it is not likely!! Have you nothing better to do than sit and think negatively?? You could go back to the coziness of the states. As for me I will continue to live the rest of my retired life here in comfort!! At this post I am through trying to banty words with " so called " smart??? Gringos. To many unhappy expats!!! With no clue!!!

Calm down and take a deep breath.  You're getting way too excited.  It's not helpful to your stated goal of living a long life in comfort!

Ecuador got $924 million in previously undisclosed loans from Deutsche Bank AG and other lenders, showing the extent of President Rafael Correa’s effort to line up a record amount of financing as oil prices plunge.  (...)

The 50 percent drop in oil prices over the past 12 months has pushed the Andean nation’s financing needs to a record $10.5 billion this year, prompting Correa to court banks, international debt investors and foreign governments to make ends meet.

The above quote is from Bloomberg. There's more about this on my blog.
http://adventuresbob.blogspot.com/2015/ … uador.html

BobH wrote:

Ecuador seems to be seeking numerous loans from China and elsewhere, which may have an impact on the direction the e-currency takes (and how the government uses it). All this is of course tied in with oil prices.

Ecuador got $924 million in previously undisclosed loans from Deutsche Bank AG and other lenders, showing the extent of President Rafael Correa’s effort to line up a record amount of financing as oil prices plunge.  (...)

The 50 percent drop in oil prices over the past 12 months has pushed the Andean nation’s financing needs to a record $10.5 billion this year, prompting Correa to court banks, international debt investors and foreign governments to make ends meet.

The above quote is from Bloomberg. There's more about this on my blog.
http://adventuresbob.blogspot.com/2015/ … uador.html

Not really in the ideal economic position at the moment are they? Goes back to a point I made in some thread awhile back, and that is basically let's see how Correa, and Ecuador handle things when oil drops, and the economy starts to slow? Am not taking a pro or con position, but am realistic, and practical enough to realize that over the next few years is when we will find out exactly how well off, or not Ecuador really is.

j600rr wrote:

Not really in the ideal economic position at the moment are they? Goes back to a point I made in some thread awhile back, and that is basically let's see how Correa, and Ecuador handle things when oil drops, and the economy starts to slow? Am not taking a pro or con position, but am realistic, and practical enough to realize that over the next few years is when we will find out exactly how well off, or not Ecuador really is.

Yep. I've made the same point -- Ecuador had two commodity booms in the 20th century -- cacao at the beginning of the century and bananas mid-century. Both followed the same pattern (and a pattern seen in lots of similar countries) -- during the boom, everybody's happy, they love the presidente, and there's stable government because there's lots of jobs and plenty of money passing through the economy.

But of course, for every boom there's a bust. and the cacao and banana busts were followed by instability and coups.

Not saying an oil bust will lead to the same thing, but it could if things aren't handled carefully. We'll see.

BobH wrote:

j600rr wrote:

Not really in the ideal economic position at the moment are they? Goes back to a point I made in some thread awhile back, and that is basically let's see how Correa, and Ecuador handle things when oil drops, and the economy starts to slow? Am not taking a pro or con position, but am realistic, and practical enough to realize that over the next few years is when we will find out exactly how well off, or not Ecuador really is.

Yep. I've made the same point -- Ecuador had two commodity booms in the 20th century -- cacao at the beginning of the century and bananas mid-century. Both followed the same pattern (and a pattern seen in lots of similar countries) -- during the boom, everybody's happy, they love the presidente, and there's stable government because there's lots of jobs and plenty of money passing through the economy.

But of course, for every boom there's a bust. and the cacao and banana busts were followed by instability and coups.

Not saying an oil bust will lead to the same thing, but it could if things aren't handled carefully. We'll see.

Would think, and hope Ecuador is in a bit better position than they were from those 2 previous cycles you mentioned Bob. They have tourism, and some other industries that have good growth potential. They have the advantage that with interest rates so low in the U.S., and other first world countries, that investors are willing to take a chance on buying foreign debt because of it's potential returns. Think that overall they are in better shape than the past, but don't really think they were in nearly as good a shape as they want, and wanted everyone to believe. However would agree that if things aren't handled carefully they could spiral out of control quite easily.

j600rr wrote:

Has there been any new news on the digital currency in Ecuador? Tried searching online, and couldn't find any current news/updates. Had completely forgotten about this subject on my last visit to Ecuador, but there  wasn't anyplace I went using the digital currency to my knowledge. Everywhere was using good old fashioned cash.

There was this https://www.cuencahighlife.com/governme … ces-backs/

I see stores or restaurants around town that put up signs that the government prints announcing that the digital currency is accepted. I have yet to actually see anyone using it.

Maybe I will install the app on my phone and put $10 into my account, just as a backup.

https://play.google.com/store/apps/deta … emicelularhttps://efectivo.ec/

Edit: Check that. That app just tells you how and where you can use it. I thought it might work like my PayPal account which gives me my balance.

Nards Barley wrote:

j600rr wrote:

Has there been any new news on the digital currency in Ecuador? Tried searching online, and couldn't find any current news/updates. Had completely forgotten about this subject on my last visit to Ecuador, but there  wasn't anyplace I went using the digital currency to my knowledge. Everywhere was using good old fashioned cash.

There was this https://www.cuencahighlife.com/governme … ces-backs/

I see stores or restaurants around town that put up signs that the government prints announcing that the digital currency is accepted. I have yet to actually see anyone using it.

Maybe I will install the app on my phone and put $10 into my account, just as a backup.

https://play.google.com/store/apps/deta … emicelularhttps://efectivo.ec/

Edit: Check that. That app just tells you how and where you can use it. I thought it might work like my PayPal account which gives me my balance.

cccmedia wrote:

Well, since J600’s first post this week, we’ve tallied reports from Cuenca, Quito, Guayaquil and the Pacific Coast.  Nobody has seen activity in e-money in Ecuador.

Unless someone from the Vilca/Loja area -- or non-Expat venues such as Santo Domingo, Lago Agrio or Nalgas del Cerdo, Sucumbíos -- reports there is e-money is use, it’s a clean sweep:  Nobody’s been seen or heard of .. using the ‘stuff.’

cccmedia

Yep, would say my question has been answered. Though Nards did say he's actually seen signs for it. No one else seems to have even seen any mention of it. It's hard to beat the ease, and simplicity of using cash. 1,5,10,20,50,100, and pretty much majority of time only 1,5,10,and 20's are used. Stick a few cash bills in pocket, and are all set. Doesn't get much easier than that.

AMDG wrote:

While it is true there is a global war on cash.......it seems to me that Ecuador's electronic money is a way for the gov to "print"  money which, unlike the USSA, cannot simply print more money.
The wonders of fiat currency.....backed by NOTHING other than faith and credit.......

Those who fail to remember history are condemned to repeat it.

Don't disagree with any of the above AMDG, but I'll play devil's advocate, and ask what type of monetary system would you recommend for society? Certainly there is some major flaws to a fiat currency, and I don't pretend to have the answer to the question. The way I see it, there will always be flaws in any type of monetary system. You could go back to precious metals, but considering the population, and amount of daily transactions in todays society, don't think that's practical. Could go back to the gold standard, and maybe we should never have alienated the gold standard, but again, am not sure going back to a gold standard would be practical at this point in time. Probably the purest, and most honest would be to go back to a barter type system, That would probably work well for small communities, but on a larger scale probably wouldn't work. Could maybe go back to something like e-gold used to have. That could possibly be viable. Please don't take anything I said the wrong way, am not trying to debate, or challenge you in anyway. I just don't see any type of monetary system that's not going to have inherent flaws. Not saying there isn't a solution, but haven't seen one yet that will work perfectly for the society we live in today.