Case 361 - Dollarization Diplomacy - The Case of Ecuador and El Salvador
This case examines Ecuador and El Salvador's decision to "dollarize," that is, to make the U.S. dollar their official currency. Britta Crandall, a visiting professor of Latin American Studies at Davidson College, explores the very different conditions and motivators that led to the decision to dollarize in each country, and how those decisions played out.
The study of these two countries’ experiences lends unique insights into the factors that drove dollarization, and the limitations of this policy. Macroeconomic crisis, ideology, and specific economic interests contributed to the decisions. These cases also reveal that the decision to adopt a foreign currency—a process that is by definition international—can be domestically driven, often in the face of international opposition.