December 29, 2000

El Salvador to launch U.S. dollar as official currency

                  SAN SALVADOR, El Salvador (AP) -- The U.S. dollar becomes legal currency
                  in El Salvador on New Year's Day, and bankers say they're ready for the change.

                  The Central Bank has sent millions of dollars to banks around the country to
                  prepare for the new measure, which will allow the greenback equal status with
                  the national currency, the colon for buying goods, paying salaries or doing

                  "The banks are ready to work in dollars," the head of the Salvadoran Banking
                  Association, Claudio de Rosa, told a news conference.

                  He said banks had carried out "changes in the banking system, automatic tellers,
                  accounts, operations and training of personnel."

                  "Everything indicates there will not be great problems, though there could be
                  some minor, correctable mishaps because of a lack of knowledge of the money
                  by some clients," he added.

                  The measure, approved in November by congress, is part of a trend in the
                  region, where countries facing chronic inflation and jittery investors hope use of
                  the dollar will stabilize and boost their economies.

                  Critics say it limits national sovereignty, reducing the ability to respond to local
                  economic problems.

                  Panama -- Central America's richest nation -- has long used the dollar. Ecuador
                  adopted it in September. Argentina has pegged its own peso to the greenback.
                  Guatemala plans to adopt the dollar alongside its quetzal on May 1. Much of
                  communist Cuba's economy also operates in dollars, though officials say that is a
                  temporary situation.

                  De la Rosa said the change would "bring permanent benefits for the country and
                  its population."

                  The colon itself will be fixed at 8.75 per dollar. The law also allows other foreign
                  currencies to be used for contracts and accounts.

                  De la Rosa warned Salvadorans to avoid giddy spending and indebtedness and in
                  the face of what are expected to be sharply improved credit terms.

                  "The reduction in the rate of interest and the possibility of longer credit terms
                  demands that we forcefully recommend the need to maintain moderation in
                  personal spending and rationality with prudence in investment by businesses," he

                  Some Salvadorans have expressed concern they will have trouble making change
                  in the new currency, though many here are familiar with the dollars because
                  Salvadorans living in the United States send home an average of $4 million a day
                  -- making remittances the third-largest source of national income.

                  Copyright 2000 The Associated Press.