Guatemala considers legalising limited dollar use

Weeks after El Salvador adopted the dollar as one of its currencies, Guatemala's Congress was considering a similar plan Monday, the Associated Press reported.
Weeks after El Salvador adopted the dollar as one of its currencies, Guatemala's Congress was considering a similar plan Monday, the Associated Press reported.

Economic minister Eduardo Weiman said he sent congress a proposal to allow the country's residents to use dollars for bank transactions, salaries or contracts. If approved, the plan could take effect in January, the AP said. "It will allow the use of the dollar in bank accounts, helping modernise the economy," Mr Weiman said.

Starting January 1, El Salvadorans will begin using the dollar to pay for everything from groceries to salaries, although people will still have the option of using the country's traditional currency, the colon.El Salvador was the third Latin American country to adopt the dollar. Panama has long used the currency, and Ecuador switched in September to fight 100% annual inflation.

El Salvador has been using dollars informally for the past decade, since thousands of Salvadorans fled to the US during the country's 12-year civil war, which ended in 1992. According to the central bank, the country receives an average of $4 million a day from more than 1 million Salvadorans living in the US. The remittances make up the country's third-largest source of income, after coffee and the assembly-for-export industry.

Mr Weiman said Guatemala's proposal would help stimulate the economy and reduce the risk of people losing money because of changing exchange rates. "We can't do what was done in El Salvador because we don't have, like them, a constant flow of foreign exchange," he said. "Our economy is dependent on exports."

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