QUITO, Ecuador (AP) -- Ecuador will gradually replace its currency with
                  the U.S. dollar to stabilize the Andean nation's economy and prevent
                  hyperinflation, government officials said Monday.

                  Juan Falconi, the production minister, said sucres currently in circulation
                  would be bought back over the next year and only small denomination sucre
                  coins would be used.

                  Finance Minister Alfredo Arizaga said in a television interview Monday that
                  Ecuador has $400 million worth of sucres in circulation and holds foreign
                  cash reserves worth $900 million. That ratio "means there will be no
                  problem in swapping sucres for dollars," Arizaga said.

                  The dark orange 50,000 sucre note, the largest denomination, which bears
                  the national seal and a portrait of former President Eloy Alfaro, will be
                  replaced with the American greenback under the plan. Under current
                  exchange rates, 50,000 sucres are worth only $2, forcing shoppers to carry
                  small bricks of cash to make purchases.

                  Mahuad criticized for economic decline

                  President Jamil Mahuad announced Sunday night that he was pegging the
                  exchange rate at 25,000 sucres to the dollar, but details of his plan to make
                  the U.S. dollar Ecuador's official currency only became clear on Monday.

                  Mahuad, a Harvard-educated political centrist who took office in August
                  1998, has faced growing calls to resign after failing to stop the rapid decline
                  of Ecuador's economy.

                  The economy shrank 7 percent and inflation topped 60 percent in 1999, the
                  highest in Latin America. Many economists predicted that speculation
                  against the sucre would quickly send Ecuador into hyperinflation this year if
                  the government did not act.

                  Mahuad said Sunday night that replacing the currency was "the only way out
                  that we have, and it is the road that we have to travel." He predicted that
                  adopting the dollar would reduce annual inflation to 10 percent this year.

                  Ecuador's Central Bank opposed the move, but Mahuad warned that he
                  would call a special session of Congress on Tuesday to fire any Central
                  Bank executives who tried to block the measure.

                  The step means the Central Bank will lose control of much of Ecuador's
                  monetary policy.

                  Political analyst Cesar Montufar criticized the move, saying it would erode
                  the nation's sovereignty and make "the president of the U.S. Federal
                  Reserve" Ecuador's true president.

                  Hundreds of people gathered outside currency exchange offices early
                  Monday expressed mixed feelings about the announcement.

                  Luis Vargas, a merchant, was happy with the news.

                  "We'll be able to work because we can bring merchandise from abroad and
                  we won't have to face this terrible variation in the value of the currency," he
                  said.

                  Military backs democratic government

                  The sucre recently plunged 20 percent in less than a week to 29,000 to the
                  dollar. A year ago, the sucre was valued at 7,000 to the dollar.

                  Mahuad's announcement came after a tense week of street protests and
                  rumors that Ecuador's military was planning a coup. The military high
                  command issued a statement Saturday expressing support for Ecuador's
                  democratically elected government.

                  Business and labor leaders have accused Mahuad of incompetence, and
                  several leftist-led organizations demonstrated on Thursday in Ecuador's main
                  cities to demand Mahuad's ouster.

                  Police used tear gas to disperse 1,000 demonstrators who tried to march on
                  the presidential palace, and the government called a state of emergency,
                  giving the armed forces authority to maintain order and detain protesters.

                  Panama is the only other Latin American nation to use the U.S. dollar as its
                  official currency. The Central American country has avoided the inflation that
                  has afflicted other nations in the region, since it could not print currency to
                  back up excessive government spending.

                    Copyright 2000 The Associated Press.