In Latin Americasome countries have chosen to adopt the US dollar as its official currency in a process known as “dollarization.” This measure, according to the Central Reserve Bank of Peru (BCRP), is the partial replacement of the local currency with the dollar in its basic functions such as savings, means of payments and account unit.
Although it is not a generalized practice in the region, the countries that have made this decision have made it at complicated moments in their economic history.
Latin American countries that have adopted the dollar as official currency
In the region, three countries have replaced their local currency with the US dollar as its official currency: Panama, El Salvador and Ecuador. Panama adopted this measure in 1904, shortly after its independence from Colombia. Although it maintains the balboa As a legal tender, it only exists in the form of coins, while the tickets in circulation are exclusively dollars.
El Salvador carried out the dollarization In 2001, with the aim of generating economic stability and improving confidence in the financial system. For its part, Ecuador made the same decision in 2000, after facing a serious economic crisis that caused the devaluation of its previous currency, the Sucre.
Reasons why some Latin American countries opted for dollarization
The dollarization It has been adopted as a strategy to stabilize economies affected by inflationary crises and devaluations. In Ecuadorthe serious financial crisis of the late 1990s led the government to eliminate Sucre and Adopt the dollar to stop inflation and recover confidence in the financial system.
Similarly, El Salvador implemented this measure with the aim of reducing the risks of devaluation of its currency and facilitating international transactions. Panamaon the other hand, he made this decision to attract foreign investment and consolidate its position as a financial center in the region.
This was the first country that adopted the dollar as official currency outside the United States
Panama It was the first country outside USA to adopt the dollar as an official currency in 1904. Unlike Ecuador and El Salvador, which dollarized their economies in response to financial crises, Panama He did it as a long -term strategy to promote economic stability. Although Balboa remains a legal tender, the US dollar has predominated in all commercial transactions in the country.
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Source: Larepublica
Alia is a professional author and journalist, working at 247 news agency. She writes on various topics from economy news to general interest pieces, providing readers with relevant and informative content. With years of experience, she brings a unique perspective and in-depth analysis to her work.
