Community Currency Experiment in Quito, Ecuador

Connections ('compromisos') in Toctiuco, People's Quarter

From "La Otra Bolsa de Valores", translated from the Spanish by Stephen DeMeulenaere

By Jurgen Schuldt, Vice-Rector, Pacifico University, Lima Peru

From the end of 1995, a community currency system called "Compromisos" has been operating in Toctiuco, a low-income people's quarter in the hills above Quito with approximately 30,000 residents. Directed by Mr. Alfonso Gandarillas of the Development NGO "Hombres de Tierra" (people of the land) and funded by the Pestalozzi Foundation, this system keep accounts and mediates payments between three related currencies: 1 Connection = 1 Sucre = 1 Resource.

The SINTRAL system is one of the thirty young initiatives that the Development NGO introduced in the community. Each member receives a cheque with which they can acquire goods and services of the other members, the cheques are then collected and the values put into a computer for keeping the accounts of each member. In this case, there is no review of the offers and requests that are made, but the members list the goods and services that they would like to acquire, and what they are offering in return.

It is certainly possible that in the long run, when the quantity of members reaches an adequate number they can circulate a photocopy of the diverse offers and requests, including the location of where they can obtain these goods or services. For now, it reduces the cost of transactions, and deals primarily with the individual requests for specific offers.

There are a number of differences between this project and the other community currency project in Peru, the SINTRAL project in Rumihuaico in that this community is comprised almost entirely of one social class, and in this case are described as people scarcely able to achieve the most basic standards of living and education. For instance, those that are half-involved, or not involved in the project are characterized by high levels of hoarding, unemployment, delinquency, gangs, drug addiction, sexual abuse, alcoholism, etc. (this low-income community was created by the migration of large numbers of poor peasants to urban areas in the 1960s.) Although the infrastructure of the community has improved substantially (paved roads, modern camps for the homeless, well-equipped schools, street lighting and water), in the change to the present generation the people live in conditions of extreme poverty. The large majority go into the city to work, where they work as labourers or in domestic services.

The leader of the system acknowledges a defect in the function, in the sense that some people purchase more than they offer, leading to a permanently high negative balance. Consequently, others have substantial positive accounts, which has led others to claim they are being defrauded by participating in the system, leading to some people losing sight and leaving the system (basically due to the consequences of inflation in the internal currency). It's considered necessary to resolve this problem, considering the conditions of poverty in the community.

That is to say, it requires solving the problem of offers of goods and basic services, that the structural problem is undermining the great demand and potential of the system. This also requires establishing a "credit limit" for each member.

On the other hand, another occurrence of great benefit to the community is the creation of businesses capable of operating according to the methods used by the businesses of the city, which is beginning to replicate goods and services offered by these business, and which can explain for a series of "economic externals" derived from the system, the principal of these taking root known as "mutual aid", and a feeling of mutual reciprocity ("today for you, tomorrow for me"). But this is also leading towards major social interaction, where the information learned in the course of trading build solid social relations within and throughout the community, instead of purely economic relations normally encountered in the conventional economy.

As for the rest, "many families cannot survive if these system does not exist", explains Gandarillas, who is now offering loans for the purchase of goods. In this sense, the members of the system can be seen as a "mutual aid group", very supportive of the local businesses of the peasant communities of the diverse regions of the country which originally provides for families, which is in turn of great value for overcoming the painful breaches which can occur in the budgets of some families between the moment when one calculates their expenses and the moment when one receives their income.

Most transactions are very small, such as chocolate, rice with chicken, pies, clothing, etc. Equally, some members also offer services such as repairing vehicles, washing clothes, etc. Slowly but surely there comes an interesting process of interaction with a similar experience, of which an enterprising exchange of different productive specializations of the community. A problem appears when differences in standards of quality between members leads to dissatisfaction, now that the offers of Toctiuco increase, except services such as construction workers, seamstresses, painters, gardeners, etc. At most, if one insists on high standards from a community that is not able to provide them, the system solely rests on a paternalistic base, simply reproducing the related conditions of dependency and subordination.

From this, one can derive a series of recommendations that one must consider:

* In the first place, it is necessary to develop the internal conditions that are indispensable for the community of Toctiuco to generate the production of the services necessary to activate the local economy from within. This requires installing education and capacity building systems, especially for those members who show the greatest difficulty in becoming more involved or using the system so that they are able to expand the range of goods and services offered.

* Secondly, it is essential that accounts are added, not only for transactions of small amounts (as we have now), without being concerned about the type of goods and services, -in quantity, quality and value- which is traded daily among the members. For they can record, on the back of each cheque, noting the amount traded of each product or service (many also note the quality of good or service received in the extra space).

* Thirdly, we must consider the use of cheques in order to reduce transaction costs. It has been decided that a member who receives a cheque for 1,000 compromisos can then re-endorse the cheque for buying goods or services for the same or another value, without the transaction disrupting the counting system.

* Fourthly, we think that initially and while the people become familiarized with the system, over three or four months they ought to work to keep their accounts balanced, in order to avoid excessive credit or debit. After three or four months, the differences ought to be eliminated with the payment in coin (sugars) for part of the deficit. We believe that after this correction of a lapse the members adjust their standards of buying and selling, with the system building solidarity and confidence among the members.

* Fifthly, to attract a large number of members and increase use of the "compromisos", one ought to be able to buy basic goods (rice, sugar, cooking oil, medicine, construction materials, etc.) which can be sold directly to the members and in "sugars". Of course, one must consider the possibilities, costs and risks of storing. In the end, securing the values for the goods is inferior to the providing the service to the people of the community.

* Sixthly, it will be necessary to install similar systems in other low-income communities in Quito with similar living standards, where one may be able to produce other basic products which cannot be made in Toctiuco, to generate a network of intercommunity exchange: bricks, corn, frijoles, bread, livestock, textiles, pottery, metalwork, etc. This requires a background study to assure a larger-scale interaction between the low-income communities of Quito and the rural peasant communities. This allows for the creation of an interdependent system between people without subordinating their communities to the large commercial centers, while eliminating a large part of the middlemen.

In the end, the people of low-income communities know that only the solidarity of a community can lead them to a greater destiny. But this social cooperation cannot be built on top of nothing, or without building a solid economic base little by little, and in collaboration with other productive and commercial economic projects, and founded upon a system of offers of goods and services, providing an adequate quality and quantity of goods. Only if the neighbourhood comes together, and builds the conditions for creating value together, will it be possible to share resources and the existing local capacities.