Ecuador has loaned 644,000 ounces of gold to the financial services company Goldman Sachs in exchange for short-term liquidity and support for public accounts. President Rafael Correa has reached an agreement with Goldman Sachs to receive $580 million.
Ecuador, unlike most other Latin American countries, cannot finance deficits by printing money since its official currency is the U.S. dollar. The dollar has provided a strong anchor for the country’s fiscal policy since it was adopted in 2000.
In addition to the gold loan, Correa hopes to place a bond issue of $700 million by end of the year.
In response to criticism of taking a loan on the gold, Correa said that it was doing no good sitting in a vault. “Why not liquify the gold so it can go to work for the people of Ecuador,” he said.