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Ecuador - Currency and Cost of Living
Petroleum resources are the major product of Ecuador. Roughly half the nation’s export income is from this sector, and it provides about a quarter of the public sector revenues. The price of oil therefore has a major impact on the economic health of the country.
Ecuador adopted the US dollar in March 2000 after a banking crisis. This move was intended to stabilise the country’s economy, which worked well the global economic crisis of 2008, when Ecuador defaulted on US$3.2 billion of sovereign debt. This was about a third of the nation’s external debt. Some 91 percent of this was later bought back in May 2009.
Economic uncertainty grew following a number of key decisions made by the government. Thirteen bilateral investment treaties were abolished, including one with the United States. An attempt to reduce the significant trade deficit led first to technical trade barriers and, later in 2015, to a rise of trade tariffs from five percent to 45 percent on roughly a third of all imports. Furthermore, intellectual property right infringement and violations were decriminalised in Ecuador in 2014. These changes were reversed in 2016 and the penalties reintroduced.
Meanwhile, China has become the nation’s largest foreign lender since other countries remained cautious about stability for their investment funds. More than $9.9billion of forward oil sales, project financing and budget support loans were agreed with China in December 2013.
However, oil prices continue to fluctuate, which leads to frequent reductions in the government budget when prices are low. This has a direct bearing on the funding of public services.
Since March 2000, Ecuador has been using the dollar as its official currency. You can easily obtain cash dollars from ATM machines in the city and decent sized towns.
However, you may find it useful to go into a bank and ask for a few $1 and $5 bills. Small businesses and taxi drivers will struggle to give you change from a $50 note, so these smaller denominations are much more useful for everyday transactions. Having said that, you don’t need to carry huge amounts of them around with you; just a few will do.
Credit And Debit Cards
In the tourist areas of Ecuador, all international companies including hotel chains and many local businesses such as restaurants and souvenir shops are happy to accept debit and credit cards for payment. A four-digit PIN is usually requested. The same card payment facilities are available across business districts and anywhere services are provided for wealthier customers.
However, there are plenty of occasions where you will need cash. If you are buying doughnuts or having your shoes shined at a street trader’s pitch, these sellers won’t accept cards. Similarly, should you happen to find yourself in an isolated town far from the tourist trail, you can’t expect to find an ATM.
Only about 60 percent of Ecuador’s residents have a bank account, but smartphones are almost universal. In 2014, Ecuador’s central bank, BCE, introduced a pay-by-phone e-payment system called Dinero Electrónico, but this was closed in 2018 due to lack of demand.
Banking In Ecuador
It is possible to move to Ecuador and continue using your bank account and cards from your home country. However, since you are likely to incur cash withdrawal fees at the ATM, and since paying for electricity charges with large amounts of cash is insecure, it is a good idea to open a bank account in the country. If you happen to lose your bank card or it gets stolen, you can replace it quickly and easily if you bank locally.
Due to the country’s history of banking and economic problems, you may prefer to leave the bulk of your savings and investments in your home country. Many expats who do not have a local salary transfer a regular sum from their home bank into their bank account in Ecuador and use that to pay their everyday living costs.
The good news is that Ecuador runs modern banking systems which should meet the standards you are used to, including online banking.
Bank branches have heavy security. For UK expats, the armed guards are an uncomfortable surprise, while US expats may not have previously encountered transparent security screens in front of the bank clerk.
Opening A Bank Account
Before you open a bank account, compare the rates of interest and the regular fees charged for transactions. Some banks roll these up into one regular monthly fee, whilst others are totally free for a basic account. Which bank account is best for you will depend on your income and spending patterns, as well as physical access to bank branches from where you live and work.
If you don’t speak Spanish, you will also need to source English-speaking banking services. For example, the US financial institution Citigroup has branches in Quito and Guayaquil.
You’ll need an appointment with a bank worker to open your account. You will need to bring official proof of identity, where you live, your income and the source of that income. You will also need to show evidence of your legal right to stay in Ecuador. Your birth certificate and passport are therefore essential, along with your cedula, tenancy agreement, recent electricity bills and bank statements, as well as your employment record or pension statement. Other documents may also be required.
Fighting Financial Crime In Ecuador
The bank has a legal duty to ensure each bank account is opened by a bona fide individual and for legitimate purposes. Their checks should identify anyone assuming a false identity or who may be committing some form of financial crime such as money laundering.
Ecuador shares borders with Peru and Colombia, who are the top global producers of cocaine. Ecuador’s dollar-based financial system makes it a clear target for laundering drug money through businesses that trade in legal industries. These activities are closely tied to drug trafficking, human trafficking, assassinations and paramilitary drug cartel activities which affect victims all over the world.
Meanwhile government corruption also troubles Ecuador, with a number of senior government officials having been investigated over alleged financial crimes in relation to construction and oil companies.
As a result, your bank will carefully examine your application information and evidence. Do not be surprised if you are asked a number of personal and direct questions about your financial affairs and the source of your income. Furthermore, if any unusual patterns of activity happen, do not take offence that you are contacted about it. Crime can only be fought effectively where everyone works together.
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