Bucking the Opposition.
The tragic series of earthquakes that rocked El Salvador have killed more than a thousand people, left one of every four Salvadorans homeless and caused more than US$8 billion In damage so far. The relentless quakes also snatched attention-and momentum--from a growing anti-dollarization movement, says Rafael Barraza, president of El Salvador's Central Bank.
"The earthquake changed the political situation of the country," he said, referring to the initial 7.6 magnitude quake in mid-January. Before the end of February, two more earthquakes slammed the country. "People are now worried about homeless earthquake victims rather than dollarization."
The dollar, exchanged at a fixed rate of 8.75 colones, became legal currency in El Salvador on Jan. 1, just 12 days before the first quake hit. There is no firm timetable for removing all colones from circulation, but the Central Bank predicts 50% of the local currency will be replaced by June.
"People are not interested in dollars or colones, they just want money," Barranza says. "With more than 1 million Salvadorans living outside of the country, many people already know how to use the dollar. And others have learned faster than we thought."
In the isthmus-wide race to dollarize, Guatemala in May joins Panama and El Salvador in adopting U.S. currency as legal tender. To-dollar-or-not remains a hot topic in neighboring Costa Rica and Nicaragua.
Salvadoran economist Rodolfo Quiros at think tank Academia de Centroamerica concurs that the dollar backlash has fizzled. But he warns: "In a couple of months people may start to protest dollarization again."