it looks like it's only a matter of time before ecuador abandons dollarization. at the rate they're going, they may scrap correa before too long:

Dec. 17 (Bloomberg) -- Ecuador’s default on $3.9 billion of international bonds means it’s only a matter of time before the country drops the U.S. dollar as its currency, Goldman Sachs Group Inc. says.

Ecuador’s use of the dollar gives President Rafael Correa no outlet for providing credit to the economy as access to foreign financing dries up and revenue from sales of oil, the nation’s biggest export, tumbles. Correa, a critic of so-called dollarization, also may use the default as an excuse to abandon the policy, said Alberto Ramos, a Latin America economist with Goldman in New York.

“Fiscal pressures will increase at the same time that the economy starts to underperform,” Ramos said in an interview. “I would not make a bet that we will have dollarization in three to five years.”

Ecuador joined Panama and El Salvador in adopting the dollar in 2000 to help curb inflation after the sucre tumbled 73 percent against the dollar and the government defaulted on $6.5 billion of foreign debt. While the dollar policy has cut inflation to 9.1 percent from 91 percent in 2000, it provides the government less flexibility as the economy slows, said Albert Bernal, head of fixed-income research at Bulltick Securities Inc.

“Exiting dollarization is not a question of ‘if’ but ‘when,’” said Bernal, a former Bear Stearns Cos. analyst whose Miami-based firm specializes in Latin America. He predicts Correa will reinstitute a local currency within one to two years.

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