Ecuador's 5.9% Current Account Surplus Masks Dollarization Fragility and Security Crisis

The context

Ecuador operates under full dollarization, a monetary regime that eliminates exchange rate risk but removes the central bank's ability to act as lender of last resort or conduct independent monetary policy. This framework places extraordinary pressure on external accounts and reserve adequacy. The country must generate sufficient foreign currency through exports, remittances, and capital inflows to maintain liquidity in the financial system. Without a flexible exchange rate to absorb shocks, adjustment mechanisms work through painful contractions in domestic demand, employment, and credit availability. The current macroeconomic configuration shows robust external performance alongside mounting security challenges that threaten economic stability and investor confidence.