A common question we get from guests considering or preparing a trip to Galapagos is "what's the national currency?". 

The short answer is "the US dollar".  Below you'll find the long answer.  

 

In January 2000, Ecuador made the dramatic decision to adopt the U.S. dollar as its official currency, a move triggered by a deep economic crisis that had plunged the nation into economic turmoil.

Throughout the late 1990s, Ecuador was hit by a perfect storm of financial mismanagement, natural disasters and external shocks. The price of oil, a crucial export, plummeted, while the devastating effects of El Niño battered the agricultural sector.  Bank fraud played an important role - the collapse of Ecuador’s banking system was marked by corruption, poor regulation, and mismanagement. The resulting economic downturn spiraled into hyperinflation, with annual inflation soaring above 60%, eroding the value of Ecuador’s currency, the sucre, and pushing millions of Ecuadorians deeper into poverty.

USD-Sucre exchange rate. We arived in Ecuador in July 1998, just in time for "the fun".  

The crisis came to a head in early 1999 (CNH Tours co-founders were living in Galapagos). As banks began to collapse, depositors saw their savings evaporate due to rapid inflation, and in a desperate move, the government froze bank accounts that March to prevent a complete financial meltdown.  On a Friday that month, the exchange rate was at about 18,000 sucres to the dollar.  In a surprise move, accounts across the country were frozen for a week, during which time everyone’s savings were replaced by dollars, but at a rate of 25,000 sucres to the dollar – translating into a huge loss for all depositors.

5,000 sucres: Worth about US$0.27 the week before dollarization, and US$0.20 the week after dollarization.

The logic behind dollarization was simple: by adopting the U.S. dollar, Ecuador hoped to stabilize its economy, restore confidence, and tame the runaway inflation that had wreaked havoc on daily life. The sucre had become virtually worthless, and with few alternatives left, dollarization seemed like the only viable option.

By July 2000, the U.S. dollar officially replaced the sucre. The immediate effect was a sharp drop in inflation, and economic stability slowly returned. However, the decision came with a price: Ecuador forfeited control over its monetary policy, leaving it vulnerable to U.S. Federal Reserve decisions.

For many, the shift to the U.S. dollar was a bitter pill to swallow, but for a country on the brink of economic collapse, it provided a lifeline, restoring a degree of stability to a deeply fractured economy.

 

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