Data retrieved from the National Institute of Statistics and Census of Ecuador (pdf)

Canasta Básica is an economic construct used to identify the price for an average family to cover its basic needs. It includes food, clothing, health, and education. It is also used to mark the poverty line: those who cannot afford this basic set of goods are considered to be living in poverty. ‘Canasta de la Pobreza’, as calculated by the Ecuadorian government, is a reduced set of goods with which a family is supposed to be able to survive. It does not include some of the basic needs in the ‘Canasta Básica’ like education or clothing.

As the above chart shows how, since 1999, when the Dollarisation of the Ecuadorian economy was announced, the average Ecuadorian family has not been able to afford even the Canasta de la Pobreza. It has been a period of 8 years in which not even the basic goods have been accessible to the Ecuadorian family.

It seems that recently there has been a reversal of this phenomenon. Since January 2008 the average monthly income has once again surpassed the cost of the ‘Canasta de la Pobreza’. We cannot claim that the families are living well, but we can see that their situation has slightly improved. I do not know if this speaks of a success of the current government social policies, or is due to private Ecuadorian economic growth, although I would suspect it is the former rather than the latter.

Lately, the talking heads from the media, political parties and even some high profile business people have been rallying in favour of holding the dollars as national currency. I am not claiming that this must be the only, or even most important factor considered in this discussion. Nevertheless, any argument in support of holding the Dollarisation must take in account this data. No state economy can survive by starving its population.