Dollar Store

by | Feb 25, 2004 | Archives

Here are some basic Ecuador economics. When Ecuador dollarized a couple of years ago there was a great deal of confusion about how much things were worth. The place felt like being in a dollar store. Everything seemed to cost a dollar. The sucre had devalued from 3,000 sucres per dollar to 24,000 before the currency conversion so no one quite knew the right conversion. Consequently everyone selected the highest price. Shoe shines which had converted to 35 cents suddenly cost a dollar. Tips that had been a quarter were a dollar. A bag of bread rose from 60 cents to guess what? You got it. One buck. This artificial inflation covered every sector of the economy and it has taken a while for the market place to sort this out.

No one really knew the correct price for anything, except eventually the consumer. Over time, prices have worked through the system and impacted the budget of the man in the street. When something has been too expensive, consumers have had to say “No, I cannot afford to spend a dollar for a shoe shine”. People said “No, I cannot tip that much” etc.

Now I am pleased to say that prices appear to have stabilized and come down. For example as Merri and I spent a day doing a real estate inspection tour in Colonial Quito to prepare for the real estate tour we were conducting, we visited many restaurants. We did not find a single dinner entre, except two (both lobster) that was over ten dollars. These prices were in some extremely fine restaurants, including one located in the five star Patio Andaluz, which is as nice a place as you will want to stay. Yet the average price of an outstanding three course meal was always under ten dollars.

Move down market a bit and prices really fall. I hosted five for lunch at a very nice indigenous restaurant. Big deal! The cost was $11.32.

So visit Ecuador. Prices are cheaper than a dollar store, but as you will see in tomorrow's message, quality is superb. Until then, good living to you!