1998–99 Ecuador banking crisis

The 1998–99 Ecuador banking crisis resulted in about 70% of the country's financial institutions closing. In 1999, economic activity decreased by 7–8% and the currency depreciated by 195%.^[1] Per-capita income in US dollar terms plummeted by 32% during the year.^[1] Unemployment increased from 9% to 17% and underemployment increased from 49% to 55%.^[1] 1.6 billion dollars of Government of Ecuador funds were used to bail out banks that failed as a result of corrupt practices and mismanagement.^[1] The money supply increased at an annual rate of 170% to pay back depositors of failed banks.^[1] In March 1999, the government froze bank deposits to avoid hyperinflation.^[1] By the end of 1999, President Mahuad's approval rating had dropped to 9%.^[1] Unresolved economic, financial and political problems led to massive protests that resulted in his departure from office on January 22, 2000.^[1]

Further reading

• "Bank Crisis Leaves 4,360 Unemployed". Business News Americas (August 10, 1999).
• Central banks and financial crises: Lessons from recent Latin American history.
• The political economy of the Ecuadorian financial crisis.
• Managing systemic banking crises
• AGD drafts law to create new deposit insurance system.
• Official Dollarization and the Banking System in Ecuador and El Salvador
• The Late 1990s Financial Crisis in Ecuador: Institutional Weaknesses, Fiscal Rigidities, and Financial Dollarization at Work (PDF).

References

1. USAID: Ecuador  This article incorporates text from this source, which is in the public domain.