Glossary: sucre (S/)
DEFINITION:
The national currency. From 1971 to 1981, the sucre was pegged to the United States dollar at S/25=US$1. Because this rate overvalued the sucre and dampened exports, the government allowed a steady devaluation of the currency throughout the first half of the 1980s. By 1985, the official exchange rate averaged S/69=US$1. In August 1986, President León Febres Cordero Ribadeneyra (1984-88) transferred all private sector transactions to the higher free market rate and determined to close the gap between that rate and the official intervention rate through regular currency adjustments. The official rate averaged S/123=US$1 in 1986 and S/170=US$1 in 1987. Responding to growing external indebtedness, capital flight, and rising inflation, the free market rate climbed to S/400=US$1 by March 1988. In response, Febres Cordero established a controlled rate for imports and exports and limited movement to within 10 percent of the prevailing official rate of S/250=US$1. As was the case in the early 1980s, the severely overvalued official currency (the free market rate climbed to S/550=US41 by July 1988) hindered export activity. Upon assuming the presidency in August 1988, Rodrigo Borja Cevallos (1988- ) devalued the controlled rate to S/390=US$1 and adopted a program to further devalue the currency by 30 percent per year. In May 1989, Borja accelerated this program to nearly 40 percent per year. Consequently, the official rate averaged S/526=US$1 and had closed to within 6 percent of the free market rate.