The politics of capital mobility in dollarized economies: comparing Ecuador and El Salvador

This article discusses how political factors have shaped capital mobility in dollarized Latin American economies. Despite acknowledging the constraints imposed by the loss of monetary autonomy, I contend that government partisanship and societal pressures still affect the content and form of capital flow management even at the bottom of the global currency hierarchy. The comparative case study on Ecuador and El Salvador since the late 2000s provides support for this argument. In both cases, administrations led by post-neoliberal left-wing parties increased the level of capital controls, while their right-wing successors gave a new impulse to capital account liberalization. However, the form of these regulatory cycles varied according to the strength of popular pressures. In Ecuador, where social movements had a strong mobilizational capacity, post-neoliberal governments repoliticized macroeconomic management, while their right-wing successor had to follow a gradualist approach in their neoliberal agenda. In El Salvador, on the other hand, given the relative absence of bottom-up pressures, post-neoliberal administrations kept a depoliticizing macroeconomic approach, while the right-wing successor faced little resistance to implementing a radical neoliberal agenda, which included even the adoption of bitcoin as legal tender alongside the United States dollar.