Lessons Learned: Luis Jacome

Luis Jacome was appointed president of the board of Ecuador's central bank in 1998 by newly elected President Jamil Mahuad. He and other members of the board resigned in 1999 in protest against a number of crisis-intervention measures they saw as threatening the bank's independence to set monetary policy. Since the 1970s, Ecuador's economy had experienced a period of growth fueled by oil exports, but by the mid-1990s the economy was reeling from a series of shocks, among them: a sharp drop in the price of oil, the effects of severe flooding on the country's agricultural production, and the cost of waging a war with neighboring Peru. The shocks destabilized the country's banking system, leading to bank runs and spiraling depreciation of the currency. Mahuad was deposed by a military coup in January 1999 and replaced by his vice president, Gustabo Noboa. Shortly after the coup, Ecuador replaced the Ecuadorian sucre with the US dollar, which helped to halt bank runs and restored some trust in the financial system.