Ecuador

Your Money

Banks and the banking system in Ecuador have a checkered history. Greater care than is usually required must be used to ensure the safety of and access to capital and income. The last collapse of the financial system in Ecuador which resulted in the failure of some banks and a consequent loss of money by customers happened as recently as 1998. From the end of the Greater Colombian Confederacy in 1830 banks grew as the economy developed from a barter to a monetized system. Initially banks were private organizations and the currency was the “sucre” which circulated in gold and silver coins. After revolution, financial difficulties in 1925 and temporary measures to deal with these problems the Central Bank of Ecuador was established in 1927 and opened first in Guayaquil. A gold standard exchange was enforced but the Great Depression in the U.S.A. created new problems. After World War II foreign exchange laws and new controls were placed on the Central Bank but it was also endowed with new powers. These arrangements lasted well for thirty years after which mounting pressures including inflation and external debt required further action. In 1992 the Central Bank became the lender of last resort in the country’s financial system. Poor economic performance and a debilitating border dispute with Peru brought on the last major “home grown” financial crisis. In 2000 Ecuador adopted the U.S. Dollar as its currency although it still mints its own centavo coins. No exchange controls are imposed by Ecuador. For all its difficulties the economy of Ecuador is now better than that of most Third World and South American countries. All of the above detail on the banking system is intended as a warning to retirees to take great care of their own finances if the move to Ecuador is made.

The best course for retirees is to obtain from their home bank details of corresponding banks in Ecuador but also not to rely on local banks totally. An offshore bank account is vitally necessary for this purpose. For day to day convenience it is useful to know where to find local ATMs. A list of banks that operate in Ecuador is easy to find as is a list of those which also use the English language. The first of these last two sites also states which banks provide an international service and also which credit cards are represented in the country. Experiences in Ecuador seem to vary with respect to dealing with banks and how to cope with them also varies. The author of Passport to International Profit has little confidence in the Ecuadorian banking system since losing money in 1999. He also offers his “Six Point Command Posture” for financial safety and security. There are less sanguine views but cautionary tales are more the rule than the exception. Some have dealt successfully with the local banking system and are happy to share results of their research and experience. Obviously this aspect of Ecuadorian life should be fully investigated both before leaving for and while on a “Golden Rule” trip to the country. It will still always be useful to have an offshore account at a bank with which business has been satisfactorily done previously, preferably over a long period. No more than the required minimum should be moved to the new country. At all times the risk, changing values and exchange rates should be spread over a number of countries. This minimizes possible losses owing to changing political and economic conditions. Details of the cost of living should determine the amount of funds which should be transferred both initially and subsequently on a periodic basis. Sites which allow estimates of the cost of living are given at the "Country" tab in the "Ecuador Revealed" section. Obviously a check can be continuously kept on changes in expenses whilst living in the country. One major limitation so far as Ecuador is concerned is that travelers’ cheques are not usually acceptable at commercial outlets and restaurants. Difficulties may also be encountered in negotiating them at banks.

The links given at the "Resources" tab of this site and the book "How to Retire in Ecuador" by Les Johns are good research beginnings for intending retirees. The book can be obtained directly from this site.

Pensions

It is likely that a pension or pensions will form the basis of the income requirements for retired persons. Proof that such income is assured or arrangements to have it paid to an Ecuadorian bank will depend upon the organisations or countries responsible for paying the pension(s). The same comments are relevant here as were mentioned in the corresponding section for Australia. To emphasize an important point, Ecuador is a country that is subject to the frozen British pension.

Other Income

As a retiree it is unlikely that local income will be derived by you but this is permissible in Ecuador. Those who move to Ecuador on a retirement visa can take up local employment because Ecuador charges income tax on worldwide income just as does the U.S.A. However, the practice and application of the law may differ in reality although this is probably more a case of the optimistic views adopted by those promoting overseas retirement for commercial purposes. The facts and the law as written are described in detail by KPMG and residents are liable for tax on their total income regardless of where in the world it is derived. It is always as well to learn the “worst case” scenario when considering where the retirement haven should be.

An interesting development in dealing internationally with funds is the currently expanding use of digital currency. Details of this system which eliminates banks and governments from the transfer of funds can be found at this site or for a graphic demonstration of this monetary phenomenon go to this "you tube" video. Although interesting the use of Bitcoin may not yet be a practical solution to financial difficulties likely to be encountered by retirees.

The links given at the "Resources" tab of this site and the book "How to Retire in Ecuador" by Les Johns are starting points for research by intending retirees. The book can be purchased directly from this site.