Dollarisation sweeps Latin America

Eurosceptics are advised not to look across the Atlantic to Latin America, where the idea of a single currency is being voluntarily embraced.

Eurosceptics are advised not to look across the Atlantic to Latin America, where the idea of a single currency is being voluntarily embraced.

Without any prompting from the American government, the US dollar seems to be insinuating itself into Central and South American countries that resisted the political and military machinations of the CIA for years, smoothing travellers' paths across the continent.

On 1 May, when the greenback replaces the quetzal as Guatemala's official currency, Guatemala will join a growing club of "dollarised" nations.

Membership now includes Ecuador, which dumped the sucre for the buck in April 2000, when $1 would buy 25,000 sucres, El Salvador, which switched from the colon to the dollar in December 2000, and Panama, which has had the dollar since independence in 1903. Argentina has pegged its peso to the dollar and other Latin American countries are discussing dollarisation.

Most countries adopt the dollar in an attempt to reverse rampant inflation. The benefit to tourists of this fiscal sleight of hand is purely practical: fewer currency exchanges mean paying fewer commission charges. And travellers will no longer have to worry about leaving Guatemala with handfuls of unspent quetzals.

But Latin American nationalists are not happy about the march of the dollar, and the anomaly of countries, particularly El Salvador, that suffered so much at the hands of US-supported governments, allowing their economic policy to be dictated by the Federal Reserve has not been lost on many observers. Before the earthquake in El Salvador earlier this year there were large-scale protests against dollarisation and outside larger towns and cities your dollar may be refused.

The dangers of multiple currencies are exemplified in Cuba, which has three parallel economies based on the dollar, the peso and the convertible peso. One dollar will buy 20 pesos, while the convertible peso is supposedly exchanged at a one-for-one rate. However the dollar is accepted far more widely than the other currencies, and nothing else will do in tourist areas.

The problem is that Cubans who work in the tourist industry consequently earn much more than other Cubans ­ a bellboy in a top hotel will earn about $25 per day, while a surgeon will earn the equivalent of $5 per week. It is not surprising then that one in ten Cubans have tourism-related jobs.

But while Cuban banks have started cashing American travellers' cheques, American-issued credit cards are not welcome. This has not deterred American holidaymakers who last year visited the island in record numbers ­ 76,898 of them ignored the US embargo.