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"The results of the election brought a respite to the markets and to Ecuador"


Verónica Artola, general manager of the Central Bank of Ecuador, defends the country's dollarization to protect itself from inflation and as a measure of fiscal discipline. This interview is part of a series of EL PAÍS with those in charge of managing the financial reserves of Latin American countries

Verónica Artola, General Manager of the Central Bank of Ecuador since June 2017 .--

For Verónica Artola (Quito, 1981), general manager of the Central Bank of Ecuador, the results of the presidential elections of last April 11 brought relief. The tense contest between a left-wing candidate seeking to use international reserves and former banker and right-wing winning candidate Guillermo Lasso ended and the markets reacted positively. The Monday after the elections, Artola spoke by videoconference with EL PAÍS, while the prices of sovereign bonds rose. "This gives peace of mind," says the manager, whose term may end this year with the arrival of Lasso to the presidency.

An economist with a master's degree, Artola belongs to a still very exclusive club.

She is one of two women at the head of a central bank in Latin America and 14 worldwide, according to a tally by

Women In Economics


This represents a meager 8% of the central banks on the planet.

Its institution is also an unconventional central bank, since it does not issue its own currency.

Ecuador chose to dollarize in 2000, in part to avoid excessive indebtedness and high inflation.

Perhaps this is what makes Artola a more open and outspoken CEO than others.

with a relaxed tone.

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His tenure has been difficult.

President Lenín Moreno appointed her manager of the Bank in June 2017, and from that moment on, Artola began to reverse the policies of Moreno's predecessor, Rafael Correa, who for years borrowed from the Central Bank.

Debt to the bank now amounts to just under 6% of gross domestic product (GDP).


What do you think of the results of the presidential elections?


The markets reacted positively and this is good news, because the candidate who won is in line with some ideas that we were also pursuing, such as the issue of the independence and autonomy of the Central Bank, which we believe is a very important law and he agrees.

It is also open to an agreement with the International Monetary Fund (IMF).

That gives a peace of mind.

In a dollarized economy, if we do not have external debt flows, the situation is super complex.


What is the economic outlook that awaits the new government?


This year is going to be much better than what we lived in 2020, due to the issue of the pandemic. At the Central Bank, we project growth of between 2.8% and 3.1% of GDP, driven in part by growth in exports, and by the reactivation of investment. Some suggest that this would be one of the worst or lowest growth rates in the region, but it is still growth. And, if the new government manages to continue with this very positive outlook, growth could be higher. As for inflation, for us, because it is dollarized, it is an issue that has not generated greater uncertainty. The issue of dollarization has given us a lot of internal stability. In addition, there is good news on the issue of the trade balance. We have been characterized by being an economy where we export less than we import,and last year we already had a positive trade balance. Finally, when we took office, the main debt creditors were governments, basically China. Now, of the 45,000 million dollars, more or less, that we have of foreign debt, 12,000 million are with international organizations and 5,000 with China.


The bills to give autonomy to the Central Bank and defend dollarization have failed or have been delayed in Congress.

There are those who assure that the proposal is a request of the IMF.

It's true?


The initiative has been set back twice in the Legislative Assembly. I feel that it is also a more ideological than a technical debate. This has to do with what happened during the presidency of Rafael Correa, when the Bank lent to the public banks and the Ministry of Finance more than 6,000 million dollars, that is, 6% of GDP. Of course, it might seem interesting to do some monetary policy, but when we sat down in 2017 to lead the Bank, we began to see that the amount that the Central Bank lent at the time was very large. We did a technical analysis and said 'up to here you can hold out and up to here it is healthy for the Central Bank and for dollarization'. Why am I telling this whole story? Because many say that, that it is an IMF request to carry out this reform and that nothing has been done. That is false.From June 2017 to August 2018 we began to recover many of the resources that we had lent and at the end of 2020 they are almost 1 billion dollars. It is throughout this course that we began to have conversations like the Monetary Fund and they agreed to have a Central Bank that makes decisions independently.


If the Bank cannot issue dollars, because it is only the Fed's competence, how could it "lend" money to the Government?


The Correa government was very used, so to speak, to having significant growth rates. When the price of oil started to fall, what had to be done, naturally, was to lower growth. So what happened? It was a decision of the authorities to use the money that was in the Central Bank to move the economy. And it did so by selling treasury certificates to the Ministry of Finance and public banks, which were recorded on the bank's balance sheet. So the international reserve was moving up and down. That balance sheet expansion and those loans grew stronger between 2014 and 2017. What they did in three years is going to take 10 years to recover.


One of the biggest concerns of your counterparts in Latin America is that an increase in interest rates in the US will lead to capital flight. Is Ecuador prepared for that scenario?


Although dollarization gives us relief from the inflationary part, we do have an effect on interest rates.

When the US Federal Reserve makes a decision to raise its rates, it is more costly for us, because our main source of reserve income in recent years has been external borrowing.

In addition, a significant rise could cause certain capital from here to decide to go out to invest there.

In Ecuador we continue to have rates between 4% and 7%, and it may still be more attractive to keep it here in Ecuador than what the Fed can pay. There was political uncertainty here, but that risk has dissipated with the results of the elections. .

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Source: elparis

All business articles on 2021-04-20

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