The Cashless Society

Latin Trade,  Sept, 1999  by Jim Wyss

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Lessons from Ecuador on what happens when your country runs out of money.

WHETHER FOR DAYS OR MONTHS, THE IDEA THAT BANK Computers will fail is perhaps the most widely held belief of what will come to pass on New Year's Eve. Recent history in Ecuador tells us that a few days without access to funds can have sweeping effects on individual lives and the economy at large.

Facing the collapse of the country's financial system, the government came to the fateful conclusion late Sunday, March 14th, that it simply could not allow the system to open the following day. The national "Banking Holiday" was made public at 6 a.m. Monday. Most Ecuadoreans missed the televised announcement, only to be confronted with the bewildering reality of locked bank doors and useless ATM cards.

By the time the hiatus ended, Ecuador's entire banking system had been closed for a full nine days; some funds remain frozen under strict regulations. As the following accounts illustrate, when people run out of money, they lose the ability to guide their lives.

SEGUNDO ENRIQUE MACAS, Tailor

Segundo Enrique Macas quantifies his economic woes in the number of suits that are never picked up from his small tailor shop on the south side of Quito. Right now his troubles add up to 18, and every last one he blames on the banking shut down, now more than three months past. "They were all ordered, but people just never picked them up:' he says, hovering over a new bolt of cloth. "I don't know if they'll ever come." Macas, 60, and his two assistants average a production of four suits a week, which means he has just over a full month's labor wasting away in the closet.

Like most of his neighbors in the bustling business district, he kept his Trajes Su Elegancia shop open during the bank closure with the hope that new customers would bring in the hard cash he needed. That simply didn't happen. "We were open but nobody ever came in," he says. "Even people who did have money were scared to spend it, because nobody knew when the banks were going to reopen. Everything came to a stop."

Like many Ecuadoreans, Macas found himself borrowing from family and friends to survive. He didn't even attempt to stock his shop with the US$50 dollars' worth of material he goes through on a weekly basis to keep the operation running.

Although the banking shutdown only lasted a short time, business has yet to rebound and the suits remain unclaimed. Despite his disappointment with long-time customers who left him in the lurch, Macas says he'll hold off a little while longer before he tries to sell them to passersby. "I've been in this business for 30 years and I've never seen anything like this before," he says.

JUAN XAVIER BORJA, TV Producer

After seven years of working as a TV production executive at one of Ecuador's biggest networks, early this year Juan Xavier Borja, 41, had finally saved enough money to pursue his dream of starting his own firm. He quit his job and began putting together the pieces of his new TV production outfit to be based in the port city of Guayaquil. "I was already talking with suppliers about what kind of equipment I would need--I had made a lot of progress," he says.

Just a few weeks later the banking system abruptly shut down. leaving him without the funds to finance his company After the banks reopened, Borja found that much of his savings was in accounts and investment funds that were subject to the harshest of withdrawal restrictions. He couldn't touch the money for up to a year. "Now, here I am, without a job, without money and without any of the materials I need to generate work for myself," he says.

Without the possibility of regaining his old job, he spends his days looking for work and pitching ideas to local TV stations. But with unemployment on the rise and the economy severely depressed, he is pessimistic about his short-term prospects. "The economy has contracted so much that I'm looking for work anywhere-Peru, Colombia-wherever they might need my services," he says. "It's incredibly frustrating to be a professional in this country." Like many of the middle and upper-middle class, Borja has found himself downsizing his life to adjust to the new economic panorama Gone are the unlimited cellular-phone calls, the premium cable channels and the endless Internet time of just a few months ago.

Although he is hopeful his life savings will be released someday, the rash of bank failures that has sunk many banks keeps him on edge. "As far as I'm concerned, the problem with this country is there are no guarantees," he says. "It can make you depressed."

PAULINA BORJA, Housekeeper

One afternoon in March, Paulina Borja's 8year-old son Christian was sent home from school early after developing a high fever. She took him to the doctor and received alarming news. "The doctor said he needed shots immediately," she says. "His throat was full of pus and he had so many sores in his mouth he couldn't swallow anything." The severe case of strep throat could be cured with about $18 worth of antibiotics.