Paul and Kristen write from Otavalo, Ecuador:
In a podcast from mid-January you made a comment about going to a "village somewhere in the Amazon" to find someone who hadn't heard of a subprime mortgage. Well, we were there last week, in the Ecuadorian Amazon basin on the Rio Napo. I asked around. True, no one seemed to know exactly why the U.S. economy had crumpled and taken the rest of the world with it. Even the generic concept of a mortgage seemed unfamiliar to many, not to mention a subprime one.
We ran into a bunch of families living in 200 sq ft cabins on stilts, living off fish from the river and the patch of plantains and yucca nearby. Not a food package visible in the house. That said, anyone connected with tourism was certainly feeling the effects. Our family of four were the only guests at our hotel in Tena and at the cabins in the jungle. "There used to be buses of tourists arriving every day," said a taxi driver, "and now none." The experience of a friend who spent a month traveling the country was the same, when it comes to tourists, Ecuador's empty.
A recent newspaper editorial reviewed the four-fold hit the country seems to be taking: falling remittances (down 25% over last year), falling commodity prices, tightening of world credit markets, and rising unemployment. Turns out Spain, where many Ecuadorians travel to work, has a new offer regarding unemployment insurance for foreign nationals. Guaranteed 6-months income, the first half as a lump-sum in Spain and the second half as a lump-sum upon return to the worker's country of origin. For Ecuador it means less remittances and more people looking for work here.
Ecuador depends on oil sales for about 63% of its exports, and I suspect it's not cheap to extract like in the Middle East. On our way down from Quito, we went by the pipeline that pumps all the oil over the Andes to get to the coast for shipping. It appears that the populist administration of President Rafael Correa was planning on those high oil prices funding many of the promises he's made as part of "la revolution ciudadana" (the citizen's resolution). Public works are everywhere, and school no longer requires tuition to continue past 6th grade. But now there's retired teachers marching in the streets to protest the 40% cut to their pensions. Sr. Correa's administration is busy expelling U.S. diplomats for reportedly "meddling" in the national police anti-drug unit while the administration is also sending representatives to Washington and the IMF looking for loans. Hard times to be anti-imperialist in a poor country, it turns out.
And you were also wondering about that time where the dollars are. There's a bunch down here. Ecuador "dollarized" in 2001, so we've been doing commerce in a combination of US bills, US coins, and size matched Ecuadorian coins.
President Rafael Correa rails against the imperialist influence of doing business in dollars and talks frequently about reverting to a national currency. One newspaper editorialist mapped the relative impossibility of this, with runs on the banks and massive losses of value in the savings citizens have amassed in dollars. While many imported items end up being really expensive, and the falling dollar has impacted them against other world currencies, the currency value has stabilized like never before and immigrants from Colombia and Peru cross the borders to work here and earn dollars. With almost everything done in cash here (recent bank failures have done little to improve consumer confidence in banks), there are a lot of dollars in circulation. I've never seen a check change hands and only the most expensive stores, restaurants and hotels take charge cards. They typically add 3-10% to cover processing fees. ATMs work well, but not always. So we often have hundreds to over a thousand dollars on hand. I never have that kind of cash around when living my direct-deposit/charge-card life in the States.