Ecuador's 5.9% Current Account Surplus Masks Dollarization Vulnerabilities at 2.9 Months Reserves

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 adjust the currency to absorb external shocks. This framework transforms reserve adequacy from a routine metric into an existential constraint: without currency issuance capacity, foreign exchange reserves become the sole buffer against balance-of-payments crises. The country currently navigates this rigidity while confronting a homicide rate of 45.7 per 100,000—among the hemisphere's highest—which threatens both tourism receipts and investor confidence. Against this backdrop, Ecuador has achieved a current account surplus of 5.9% of GDP, a rare external position for an emerging market, yet one that demands scrutiny of its sustainability and the adequacy of protective buffers.