The official currency of El Salvador and the dollar’s decline
The Wall Street Journal has an article today about what European firms are doing to tackle the “dollar problem” referring to the ever weakening dollar compared to currencies like the euro. The article also mentions that some people are taking advantage of this by moving operations to economies that operate in the US dollar. What does this have to do with El Salvador? Well, the United States isn’t the only country in the world that officially uses American dollars. Many merchants across the world accept dollars and other stable currencies (like the Japanese yen in many Asian countries and increasingly the euro). But El Salvador is one of the countries that relies exclusively on the US dollar. That means that El Salvador’s currency is the dollar and the value of El Salvador’s currency goes up and down as the dollar goes up and down. Ecuador is in a similar situation using the US dollar as their official currency. Elsewhere in Central America Belize, while having their own currency, pegs the Belizean dollar to the US dollar. That means that the exchange rate between one Belize dollar and one US dollar remains constant and as the dollar weakens so does the Belizean dollar relative to other currencies. And that’s what’s happening. Over the past five years or so the US dollar has weakened compared to all the major currencies like the Japanese yen, euro, and even the Canadian dollar and Australian dollar.
Thinking about traveling to El Salvador? Then this is good news for just about everyone. Travelers to El Salvador from the United States will be happy to learn that there money goes just as far as it always has in the country whereas if they were to travel to Europe or even Canada or Mexico, Americans would find that their money buys much less than it did just a few years ago. I’m talking 25 to 50% less. But, inflation aside, everything in El Salvador costs as little as it ever did to American consumers. For travelers coming from Japan or Europe to visit El Salvador (or Ecuador) they will be pleasantly surprised at how cheap everything is. And this is really only the case in those Latin American countries whose currencies are pegged to the dollar. Brazil’s economy is going strong and Argentina has recovered since there currency collapsed just a few years ago. The Mexican peso is up against the US dollar. So visitors from just about anywhere in the world can benefit from great deals in El Salvador, whether it be hotels, fine dining, entertainment, resorts, or goods to take home.
