El Salvador’s colón: Fall of a half-baked domino

Michael Peterson

But the decree by El Salvador’s president Francisco Flores establishing the dollar as a legal unit of currency from the beginning of next month is significant for two reasons.

First, El Salvador has become the first Latin American nation to join the dollar bloc at a time of its own choosing. The president claims to have had the dollarization decree ready in his desk for the past eight months.

Unlike Ecuador or Argentina, El Salvador is not suffering a banking or currency crisis (Argentina set up a currency board in 1992 to stave off hyperinflation).