The Cashless Society.

Lessons from Ecuador on what happens when your country runs out of money.

WHETHER FOR DAYS OR MONTHS, THE IDEA THAT BANK Computers will fail is perhaps the most widely held belief of what will come to pass on New Year's Eve. Recent history in Ecuador tells us that a few days without access to funds can have sweeping effects on individual lives and the economy at large.

Facing the collapse of the country's financial system, the government came to the fateful conclusion late Sunday, March 14th, that it simply could not allow the system to open the following day. The national "Banking Holiday" was made public at 6 a.m. Monday. Most Ecuadoreans missed the televised announcement, only to be confronted with the bewildering reality of locked bank doors and useless ATM cards.

By the time the hiatus ended, Ecuador's entire banking system had been closed for a full nine days; some funds remain frozen under strict regulations. As the following accounts illustrate, when people run out of money, they lose the ability to guide their lives.

SEGUNDO ENRIQUE MACAS, Tailor

Segundo Enrique Macas quantifies his economic woes in the number of suits that are never picked up from his small tailor shop on the south side of Quito. Right now his troubles add up to 18, and every last one he blames on the banking shut down, now more than three months past. "They were all ordered, but people just never picked them up:' he says, hovering over a new bolt of cloth. "I don't know if they'll ever come." Macas, 60, and his two assistants average a production of four suits a week, which means he has just over a full month's labor wasting away in the closet.

Like most of his neighbors in the bustling business district, he kept his Trajes Su Elegancia shop open during the bank closure with the hope that new customers would bring in the hard cash he needed. That simply didn't happen. "We were open but nobody ever came in," he says. "Even people who did have money were scared to spend it, because nobody knew when the banks were going to reopen. Everything came to a stop."

Like many Ecuadoreans, Macas found himself borrowing from family and friends to survive. He didn't even attempt to stock his shop with the US$50 dollars' worth of material he goes through on a weekly basis to keep the operation running.

Although the banking shutdown only lasted a short time, business has yet to rebound and the suits remain unclaimed. Despite his disappointment with long-time customers who left him in the lurch, Macas says he'll hold off a little while longer before he tries to sell them to passersby. "I've been in this business for 30 years and I've never seen anything like this before," he says.

JUAN XAVIER BORJA, TV Producer

After seven years of working as a TV production executive at one of Ecuador's biggest networks, early this year Juan Xavier Borja, 41, had finally saved enough money to pursue his dream of starting his own firm. He quit his job and began putting together the pieces of his new TV production outfit to be based in the port city of Guayaquil. "I was already talking with suppliers about what kind of equipment I would need--I had made a lot of progress," he says.

Just a few weeks later the banking system abruptly shut down. leaving him without the funds to finance his company After the banks reopened, Borja found that much of his savings was in accounts and investment funds that were subject to the harshest of withdrawal restrictions. He couldn't touch the money for up to a year. "Now, here I am, without a job, without money and without any of the materials I need to generate work for myself," he says.

Without the possibility of regaining his old job, he spends his days looking for work and pitching ideas to local TV stations. But with unemployment on the rise and the economy severely depressed, he is pessimistic about his short-term prospects. "The economy has contracted so much that I'm looking for work anywhere-Peru, Colombia-wherever they might need my services," he says. "It's incredibly frustrating to be a professional in this country." Like many of the middle and upper-middle class, Borja has found himself downsizing his life to adjust to the new economic panorama Gone are the unlimited cellular-phone calls, the premium cable channels and the endless Internet time of just a few months ago.

Although he is hopeful his life savings will be released someday, the rash of bank failures that has sunk many banks keeps him on edge. "As far as I'm concerned, the problem with this country is there are no guarantees," he says. "It can make you depressed."

PAULINA BORJA, Housekeeper

One afternoon in March, Paulina Borja's 8year-old son Christian was sent home from school early after developing a high fever. She took him to the doctor and received alarming news. "The doctor said he needed shots immediately," she says. "His throat was full of pus and he had so many sores in his mouth he couldn't swallow anything." The severe case of strep throat could be cured with about $18 worth of antibiotics.

When Borja, 34, went to the hank that afternoon to tap into the savings she had tucked away from her housekeeping jobs, she discovered it was untouchable. Having spent the last of her cash on the doctor's visit, coming up with cash for the shots seemed overwhelming. "I tried to borrow from my sisters, but everybody was in the same situation," she says.

A full three days later, Borja (no relation to Juan Xavier Borja) had finally scraped up enough change to buy the medicine from a pharmacist, who gave her a small line of credit. "The doctor also told me I needed cream for the sores in his mouth, but I just couldn't find the money to do it:' she says.

Christian recovered and Borja and her husband eventually had access to all of their savings, but the experience rattled their faith in the system. "The little bit that we did have in the bank we took out," she says. "It may not be that safe but at least we can get to it when we need it."

ERIC NOTARIANNI, Shrimp Exporter

When the crisis came, Eric Notarianni knew he was going to have problems. General manager of Songa, Ecuador's third-largest shrimp exporter, Notarianni, 55, is responsible for making sure some 1.7 million pounds of shrimp per month get shipped to markets in Asia, the United States and Europe.

Although the company was able to maintain production for the week and keep all its customers stocked, the whole process became a nightmare. "It was disastrous in terms of the normal running of our business," Notarianni recalls. "We couldn't pay people and we couldn't get money in or out of the country" To aggravate matters, the bank closing coincided with payday leaving the firm with more than 1,000 grumpy workers.

The subsequent freezing of some of the firm's checking and savings accounts, plus the delays in outgoing and incoming checks caused by the banking holiday wreaked havoc in the accounting department for weeks on end. "There was no petty cash so we couldn't pay suppliers. Even worse, we were forced to give them worthless checks that couldn't be cashed. We were never sure how much money was frozen, because there were many checks in the system that had not been cleared yet," he explains. "And, of course, we could never get a call through to the bank to figure it all out ... There were a lot of bounced checks during that period."

The bank freeze also cast legal shadows on the company Under Ecuadorean regulations, exporters must bring their dollar profits back into the country within 90 days and convert them into sucres in the local banking system. "We were in a situation where we couldn't bring the money back in, so the law essentially turned us into criminals," Notarianni says. "The whole thing was very confusing."