Correa says ‘dollarization was a bad idea’; says that Ecuador’s reliance on the dollar puts country in a financial ‘straight jacket’

President Rafael Correa

President Rafael Correa repeated on Tuesday his criticism of Ecuador’s decision to use the U.S. dollar as its currency.

His comments come as oil prices, which are based on the dollar, are approaching five-year lows. Correa said that if Ecuador had its own currency or was using a regional South American currency, as he has advocated, the effect on the country would be less severe.

“Dollarization was a bad decision,” Correa said. “Right now, it is doing exactly the opposite of what it must do to address the scenario of falling oil prices.”

Ecuador, which is the smallest member of OPEC, has used its oil revenues to upgrade the country’s infrastructure and social services. With oil prices slumping, Correa says Ecuador needs a flexible currency now more than ever. “In these difficult times, we will see just how important it is to have a national or regional currency.”

Ecuador adopted the U.S. dollar in 2000 after the value of its former currency, the sucre, nosedived in 1999.

Correa has long warned that the continued use of the dollar is holding back the economy, once describing it as a “straight jacket.”

In July, Ecuadorian legislators approved a law paving the way for the use of a parallel electronic currency for domestic use, although that will still depend on the dollar for its backing.

Despite his dislike of the dollar, Correa has said in the past that a change of currency is probably years away.