Jamil Mahuad at UTEP: The President Who Changed Ecuador’s Future

Why it matters: Jamil Mahuad, former President of Ecuador, delivered an engaging talk on "Lessons After 25 Years of Dollarization in Ecuador" during the latest Center for Free Enterprise Speaker Series.  

His message: Sometimes the boldest policy decisions, those that break with convention and defy international institutions, have impact across generations. 

The big picture: Mahuad offered a rare first-hand account of two of his most long-lasting accomplishments: 

• The signing of a peace treaty with Peru, avoiding a war and putting an end to a history of tension and armed conflict. 

• Ecuador dollarized on January 9, 2000, amid a catastrophic economic crisis with 96% inflation and a collapsing banking system. 

• The decision was made without precedent, technical playbook, or support from international organizations like the IMF and World Bank. 

Key takeaways: 

Peacemaking requires the same boldness as economic reform. 

• Mahuad recounted his experience negotiating peace with Peru, ending a decades-long territorial dispute. 

• The peace agreement required political courage, defying critics who saw compromise as weakness. 

Critics were wrong about dollarization's impact. 

• Opponents predicted economic collapse, social chaos, and increased poverty. 

• Instead, Ecuador achieved price stability, financial system recovery, and sustained remittance flows that support millions of families. 

• The loss of "monetary sovereignty" critics warned about turned out to be a feature, not a bug, it prevented the inflationary policies that destroyed Venezuela and Argentina. 

Between the lines: Mahuad's talk challenged the assumption that technocratic expertise and international approval are prerequisites for successful policy. Sometimes, leaders in crisis must trust their judgment and act decisively, even when the experts say it can't be done. 

The bottom line: Twenty-five years of evidence vindicate Ecuador's dollarization. The decision saved the country from hyperinflation, provided monetary credibility, and gave Ecuadorians the stable currency they continue to defend today.  

Mahuad's reflection offers crucial lessons for policymakers facing crises: bold action, grounded in reality rather than theory, can succeed where conventional wisdom fails.