Historical Sketch

The northwest of Latin America had come under Spanish rule in the mid-16th century. In 1717, the Viceroyalty of New Granada was split off Peru, consisting of the three provinces of Caracas, Cundinamarca, and Quito. In the early 19th century began the war of liberation which led to the independence of New Granada in 1819. The state adopted the name of Colombia, later referred to as "Greater" Colombia. Within just ten years, the new state broke up, and the three former provinces declared independence as Venezuela (Caracas), New Granada (Cundinamarca), and Ecuador (Quito). Originally, the name of the former Quito province had rather been styled "(State of the) Equator in Colombia" but already in the mid-1830s the name "Republic of the Equator" became common.

Monetary History Overview

Ecuador enacted a first coinage law in 1831. The Ecuadorian Peso took over the Spanish colonial bimetallic standard, was therefore identical to the Colombian Peso of 1826. In daily payment transactions, however, specie coins were the exception, the majority of the circulating medium consisted of debased silver, a large portion being crudely hammered and of irregular shape, the so-called "Macuquina". The Ecuadorian state did not have the means to immediately remedy the circulating money. A first attempt was made in 1846, when the Macuquina was devalued compared to full value specie. In December 1856, a new currency law as passed introducing the French bimetallic standard, where one fifth of the Peso which was also referred to as "Ecuadorian Franc". The state could only produce a few specie coins and was still unable to withdraw the debased and foreign coins. A commercial bank obtained the right to issue paper money in 1860, which quickly began to dominate the circulation. The same bank also commissioned the production of subsidiary coins, which were over-valued to the Macuquina and disappeared quickly. More commercial banks joint in and issued paper money in the following decades. In 1884, another attempt at remedying the monetary situation was launched. The Ecuadorian Sucre retained the French bimetallic standard from its predecessor. In contrast to earlier currency reforms, the state was now able to fix the monetary disarray, and in 1890, all debased and foreign coins were withdrawn. Paper money was still issued by various commercial banks, and unlike other countries, several banks also commissioned the production of subsidiary coins. In 1898, the Sucre switched to the gold standard and got pegged to the pound Sterling. British gold coins were imported to form the majority of the circulating specie, complemented by a few Ecuadorian gold coins. The gold standard was suspended in the run-up to First World War and got reinstated in 1927 at about half of its pre-war value. In the same year, the private paper money issuance was abolished, and the new central bank began operations. In 1932, the gold peg was abandoned for good, and the Sucre depreciated by some 60% during the following decade. In 1944, a Dollar peg was established that had to be revised several times until it ended at about 50% of the initial value in 1970. In 1982, the Sucre was floated and quickly depreciated at an average pace of about 25% per year. To stop the downfall, in January 2000, the Ecuadorian government decided to abandon the national currency and to dollarize the economy. Beginning March, the United States Dollar replaced the national currency, and the Sucre got demonetized within half a year. Since then, US banknotes are circulating together with local subsidiary coins.

Ecuador joined the International Monetary Fund (IMF) on 28.12.1945 as a founding member.

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Monetary History Sources