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Panama - Currency
At the time the currencies were exchanged the Colombian peso was given the value of half of a balboa. More than 4 million pesos were turned in to the banks for exchange to the new currency. All of the old coins were melted down, some in New York and some in London. The total was almost half of all the Colombian coins in circulation which led to some problems for the Colombian economy at the time.
The new currency was immediately linked to the American dollar and was structured in very much the same way. The balboa is divided into 100 centesimos and has the same value and exchange rate as the US dollar. There are no longer any Panamanian banknotes as they just use American banknotes, although Panama does have its own coins. It is worth noting that if you have American $50 and $100 bills then some businesses, particularly small businesses, will not accept them. Some shops and businesses that do take them will expect you to produce identification first. If you go to the bank and are given coins you may find that most of them are US coins. Often if you ask for US coins you can be told that the bank does not hold them in stock but they are just not sorted and kept separately.
This can be confusing, particularly if you are travelling to Panama and try to obtain Panamanian currency. It is easier to take American currency or traveller’s cheques as these are accepted everywhere and there is no need for exchange of currency. There are bureau de change offices in numerous places across the country, with most hotels and banks offering this facility.
As the balboa is interchangeable with the US dollar, the exchange rate with the currencies of other countries is the same rate as the US dollar has with them, so to find out how your currency compares with that of Panama, simply check the rate for the US dollar.
Coins are available in denominations of 1, 5, 10, 25 and 50 centismos. Coins of higher denominations are available but these tend to be commemorative coins for special occasions. The balboa banknotes are known as the ‘7 day dollar’ as they were printed in 1941 but recalled and destroyed just a week later. These are now collectors’ items and can still be seen but are not in general circulation. These are the only Panamanian banknotes which have ever been produced. The coin with a value of 1 balboa is also not used very often, but banks can still provide it. Coins are not produced within the country itself, but are struck in other countries such as the US, the UK and Switzerland.
Panamanian coins are the same size, shape and weight as US coins. This means that they can be used in US vending machines and coin operated telephones, although they are not officially legal tender in the country and the practice is not strictly legal. US coins can likewise be used in Panamanian telephones and vending machines.
By linking itself to the US dollar there have been several benefits for the economy of Panama. The dollar is a relatively stable currency and Panama cannot devalue the currency by mismanagement or print new notes. The downside to using the dollar is that the Panamanian government has very little control over financial policy and it makes them very dependent upon the US.
Panama has an inflation level which is higher than that of the US, simply because the importation of goods makes them more expensive than they would be in the US or the UK, so despite the parity with the dollar, consumers should not expect to be paying the same prices for goods.
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