Portada FINANCE AND MONEY
by Marcos Ibargüen

Quetzal: Legal Currency

During this century, Guatemala has experienced two important monetary reforms. The first was that in which the quetzal was born as legal currency in Guatemala. Back then, the quetzal was based on the gold standard, in parity with the North American dollar, and a mixed capital Guatemalan bank was established, the Central Bank of Guatemala, which was exclusively responsible for monetary supply. The second, and most important, monetary reform occurred in 1945, when the gold standard was abandoned, substituting it for the gold exchange standard, which was not more than an hegemony with the North American dollar.

The only substantial modification in our monetary system, since the 40's, has been the constitutional reform that occurred in 1994, which limited the power of the Monetary Board to authorize the Bank of Guatemala to offer financing or guarantees to the State and its decentralized entities. It also forbade the Bank of Guatemala to acquire stock that was negotiated in the primary or secondary market. Nevertheless, the country's monetary policies still depend on the Monetary Board.

During the last two years or so, there has been discussion about what could be the third important reform in our monetary regime: the so-called "Law for Exchange De-concentration", which recognizes the negotiation of contracts in Guatemala, and the right of Guatemalans to utilize currencies other than the quetzal.

Exchange requires, at all times, stable currencies and, although the quetzal has been stable lately, Guatemalan monetary history demonstrates that any time people are forced to use a certain currency exclusively, the attempt fails, directly or indirectly, because of the mere economic need for exchange.

The announced reform that will de-concentrate the polemic quetzal-currency, will not change the current behavior of Guatemalans towards their national currency; rather, it will legalize a situation that, at the moment, holds juridical uncertainties that threaten exchange and the national economy.

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March, 1997