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

Abstract

This article discusses the politics of capital mobility in dollarized Latin American economies. Building upon the Polanyian notion of double movement and the international financial subordination research program, I contend that the ideology of the governing party and the strength of popular mobilization still contribute to policy variegation in capital flow management even at the bottom of the global currency hierarchy. The case studies on Ecuador and El Salvador since the late 2000s provide support for this argument. In both countries, administrations led by post-neoliberal left-wing parties tightened capital flow management, while their right-wing successors gave a new impulse to capital mobility. However, these regulatory cycles varied according to the strength of popular pressures. In Ecuador, where social movements had a strong mobilizational capacity, post-neoliberal governments deployed encompassing capital controls, while their right-wing successor had to follow a gradualist approach in their liberalizing agenda. In El Salvador, on the other hand, given the relative weakness of the bottom-up pressure, post-neoliberal administrations pursued a targeted macroprudential approach, while the right-wing successor faced little resistance to implementing a radical neoliberal agenda that included even the adoption of bitcoin as legal tender alongside the United States dollar.