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History of the Money PDF Print E-mail
Friday, 30 March 2012 11:49

In olden times, value of goods was measured by making a comparison of the object to valuables of the place.     It can now be understood why our pre-Columbian ancestors used cacao as currency;  they considered chocolate made from cacao as a valuable, as they thought it was the drink of Gods.

Even though, bartering was a way of trading until XX century, the use of cacao as exchange value dates all the way back to the rise of the Mayan civilization. The Xontle was the cacao’s monetary unit and was made up of 400 cacao almonds. 

The Spaniards introduced their coin, the Real, into the country. Although, cacao continued to be used at a exchange rate of 200 cacao almonds per Real. 

The first coins that circulated in our country were minted in Spain, until the first Mint House was finally founded in Guatemala in 1731. However, the most commonly used coins during colonial times were those called macacos or morlacos.

 

Imagen de un moneda conocida como macaco

The macacos were irregular shaped silver pieces; mostly minted in Peru or Mexico and they had been cut with pliers; coins were engraved with the columns of Hercules with the inscription "Plus Ultra" on them. When traded in large quantities, these coins were accepted by their weight rather than by their nominal value. The macacos continued in use after the Independence of the Central American countries and on July 9, 1856, they were established as legal tender.

 

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The farm tokens, known as “fichas de finca” appeared at the same time as the macacos and these were tokens manufactured out of brass. Most of them were circular and they could be differentiated among themselves, because the name of the issuing farm was engraved on the coins. These farm tokens were used to pay farmers in exchange for their work and the farmers in turn would go to the local stores to purchase their goods.

The colonial monetary system did not change during the period of the Central American Federation. The silver peso, equivalent to 8 reales was used, though the first regional coin was minted to commemorate the Independence. The first changes occurred later when the government ordered the minting of national gold and silver coins. The silver pieces had an “R” engraved on them, which meant “Real” and the gold coins had an “E” engraved meaning “Escudo”. 

En 1883, bajo la presidencia del doctor Rafael Zaldívar, se decretó la Primera Ley Monetaria, adoptándose el Peso como unidad monetaria y se descartó el sistema español de división del Peso en 8 reales, estableciéndose por ley el sistema métrico decimal, donde el peso equivalía a 10 reales.

First Monetary Law was decreed in 1883, under the presidency of doctor Rafael Zaldívar, adopting the Peso as monetary unit and the Spanish system of dividing the Peso into 8 reales was discarded;  at that time, the decimal metric system was established and the Peso had the equivalence of 10 reales.First bank notes appeared in El Salvador at the end of the XIX century.  These played a very important role as change documents, as a measure unit of the value of goods, and as a savings element.  Private banks authorized by the government were in charge of issuing these notes.

 

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The Banco Internacional founded in 1880 was the first bank to issue Salvadoran bills.  This bank was granted the exclusive right of issuing bills and these had to be received at the public sector agencies.   Later on, two other banks were authorized as well:   Occidental, Salvadoreño and Agrícola Comercial.

The Mint House was inaugurated on August 28, 1892, under the Presidency of General Carlos Ezeta.  On October 1,  same year, Legislative Assembly, as a tribute to Christopher Columbus on IV Centennial of the Discovery of America, reformed the 1883 Monetary Law and changed the name of our monetary unit from Peso to Colon.  At that time, the exchange rate of the Colon was decreed at ¢2.00 per US Dollar.

Second Monetary Law was decreed in 1919, establishing that all coins that were worn out would be taken out of circulation and cut or perforated pieces would not serve as legal tender.  No tokens or receipts were allowed in substitution of the currency.  Law would penalize this sort of infringement.  This law also established that the Ministry of Finance would have control of the monetary circulation.

Between 1920 and 1930, El Salvador was living under an era of economic prosperity.  Later, the world depression, drop of international coffee prices and lack of control in the monetary system would bring to the country  the greatest economic crisis ever experienced.

Country did not have an institution that would assure the purchase power of the currency, nor to oversee activities of the banks.  Due to this reason, Government decided to contract the services of an expert Englishman, Frederick Francis Joseph Powell, to analyze banking structures.     In his report, Mr. Powell concluded that the banking system needed to organize a central bank within the traditional system, to maintain and protect currency and credit activities and to have sole right to issue notes; one of the main objectives was to assure the external value of the national currency, the Colon.

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By initiative of Executive Branch, on June 19, 1934,  the Legislative Assembly approved the Law for the Creation of the Central Reserve Bank of  El Salvador; its main role would be to control the volume of credit loans and demand of circulating currency, as well as sole right to issue notes.  Ever since the creation of the Central Reserve Bank, it was the only institution in charge of issuing notes.

Central Reserve Bank of El Salvador, on August 31 1934, issued its first line of bills in the history of El Salvador and denominations were one, five, ten, twenty-five and one hundred colones.  In 1955, was added another denomination, two colones bill, and in 1979, was added the fifty colones bill.

 

 



 

Last Updated on Wednesday, 04 July 2012 14:22
 
Banco Central de Reserva de El Salvador
República de El Salvador, C. A
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