El Salvador is a small country in Central America and its official unit of currency is the US Dollar. The country adopted the US dollar as its currency in 2001. Previously, its national currency was the El Salvadoran Colon and one colon was equal to 100 centavos. The state of El Salvador used the colon currency from 1892 to 2001. The word “colon” was derived from the name of Christopher Columbus as, in Spanish, his name was translated to “Cristobal Colon.” Although the government of El Salvador changed the state’s currency from the colon to US dollars in 2001, some stores or restaurants still issue change in colons. The US dollars are issued by the Federal Reserve. It is one of the most stable currencies in the world.
History of Currencies in El Salvador
After obtaining independence in 1830, El Salvador informally used macaco as its currency before becoming the country’s official currency in 1856. During this time, other currencies such as the Spanish peso and brass coins were also used for executing transactions.
The first time El Salvador minted its own currency was in 1877. The minted currency was in form of silver coins and paper currency. Later on, following the implementation of the First Monetary Law in 1883, the peso was adopted as El Salvador’s currency replacing the macaco. At first, 1 peso was equal to 8 reals. However, with time 1 peso became equal to 10 reals. The government gave three banks the right to issue the currency; Agricola Comercial, Banco International, and Occidental Salvadoreño.
In 1892, the Monetary Law was revised resulting in the official currency being changed from peso to colon. The exchange rate at the time was 2 colons per 1 dollar. The sole issuer of the colon became the Central Reserve Bank of El Salvador in 1934. The reserve bank minted its first bills on August 31, 1934.
The colon was the currency of El Salvador for over 60 years before the country adopted the use of the US dollar. The dollar was adopted following the end of civil war that negatively impacted the economy. It was a stable currency and the government of El Salvador hoped that it would boost their economy.
Coins and Notes
The first definition of the US dollar occurred through the Coinage Act of 1792. The popular dollar coins used are 1 cent, 5 cents, 10 cents, and 25 cents. On the other hand, the common bank notes include 1, 5, 10, 20, 50, and 100 dollar bills. The 2 dollar bill is becoming rare. One US dollar can be divided into smaller units of 100 called cents or 1,000 mills.
Countries That Use the US Dollar
Apart from El Salvador, many other nations also use the US dollar as their currency including the Marshall Islands, Ecuador, East Timor, Panama, Palau, and Zimbabwe. The US dollar is among the most widely traded currencies in the Forex markets. Its strength and popularity can only be compared to currencies such as the British pound, Canadian Dollar, Euro, Japanese Yen, and the Australian Dollar.