When visiting Panama, you might wonder what’s the local currency. Having enough money for your trip is crucial. When in other countries, it’s also best to understand the local currency and the value of things. This knowledge will help you not only save money but prevent others from taking advantage of you.
In Panama, the local currency is the Panamanian Balboa (PAB). In 1904, Panama started using the United States Dollar (USD) as a secondary currency. The Panamanian Balboa ties permanently with the US Dollar, having the same value every time.
If you’re going to Panama for a vacation, you need to understand how the local currency works. What are the pros and cons of using a US Dollar in Panama? Can you use other currencies in Panama?
Let’s find out.
The History and Use of The Panamanian Balboa
The Panamanian Balboa is the official currency of the country of Panama. The name of the Balboa is in honor of Spanish conquistador and explorer Vasco Nunez de Balboa. Balboa was the first European explorer who crossed the Isthmus of Panama.
Following the independence of Panama from Colombia, the Balboa replaced the Colombian Peso. In 1941, Panama’s then-President Arnulfo Arias tried to push for a central bank in the country. It failed to create enough balboas, creating only 2.4 million banknotes out of the mandated 6 million.
A week after its establishment, Ricardo Adolfo de la Guardia Arango replaced Arias. A coup d’etat unseated the President, and the current power dismantled the central bank. This resulted in burning the first and last paper currency of Panama except for those circulated on that week.
With a lack of an established central bank, Panama became an unsavory offshore tax haven. It became common to use Panama for offshore bank accounts for tax evasion and money laundering.
With the passing of the last few years, Panama shed off this reputation by active work with the US government to prevent abuse.
The History of the US Dollar in Panama
The US Dollar is a far older currency in Panama compared to the actual Balboa. The US dollar has been under use as a currency in Panama as a pre-republic currency. As a currency, it has been in use since 1849.
During its first appearance, Panama benefited from its use of the dollar. During this time, the Panamanian railroad went under construction. Because of the California Gold Rush, people from East America and Europe wanted a piece of the action.
At the time, Panama was a safe route to take instead of going through the United States itself. People used the expedition route of the US East Coast going through Panama via the Chagres River. By doing so, people were able to evade ambushes from natives and bandits.
When Panama was under Colombia, the US dollar became a stable currency for circulation. At the duration of the Thousand Days War of 1899, its value underscored further. The Colombia Peso was over-issued to pay for war expenses, so much so that its value tanked.
Once Panama separated from Colombia, the US Dollar became the preferred currency of Panamanians. The United States came into an agreement with Panama in June 1904, known as the Monetary Agreement of 1904. In this, the country established the value of the Panamanian Balboa to base on the fiat value of the US dollar.
This is the reason why the Balboa always has the same value as the US Dollar. This is also the reason why they are interchangeable in Panama.
What Are the Denominations for the Balboa?
The Balboa uses symbol B/. It divides into 100 centesimos. There are six types of coins in the Balboa, they are:
· Un centesimo (B/. 0.01 or 1 US penny)
· Cinco centésimos de balboa (B/. 0.05 or 1 US nickel)
· Un décimo de balboa (B/. 0.10 or 1 US dime)
· Un cuarto de balboa (B/. 0.25 or 1 US quarter)
· Medio balboa (B/. 0.50 or 50 US cents)
· Un balboa (B/. 1 or 1 US Dollar)
Because of its lack of a central bank, Panama does not have paper currency.
The Pros and Cons of the US Dollar in Panama
Is there a real advantage of using the US dollar in Panama instead of the Balboa? The US dollar presents a few real advantages but disadvantages at the same time. They are:
|Pros of US Dollar||Cons of US Dollar|
|Convenient||You likely get Balboas as change|
|Exchangeable outside Panama|
|Uses Banknotes/Paper Money|
Let’s break these advantages and disadvantages, so we understand how things work. First, the edge of the US dollar comes from convenience. If you have US dollars, you won’t have to go to money changers to change from Panamanian Balboa.
Panamanian establishments everywhere accept the US dollar as a working currency. From buses to restaurants, you can go around with only US dollars on hand. At the same time, you can go back to the United States with dollars in your pocket.
The Panamanian Balboa does not have banknotes or paper currency. Having the US dollar makes it easy for you to pay for services in Panama.
If you’re from other countries and forget to replace your US dollars to your home currency, it’s easy to get proper forex. The disadvantage, however, comes from the interchangeability of US dollars and Balboa.
In cases where an establishment has no dollars, you can get Balboas as a change. While the Balboa is excellent to use local, there’s a limit to where you can exchange them. In many non-Western countries, the Balboa is not a familiar currency pair. This can then pose as a challenge to get back your dollars.
Can I Use Other Currencies in Panama?
As the only recognized currencies in Panama are US Dollars and the Balboa, Euros are not usable. If you have currencies like Euros or Sterling Pounds, you would need to visit money changers.
It’s not easy to find proper money changers in Panama itself. Your best chance will be at a Casa De Cambio (Currency Exchange Office) and the airport. You can also visit major banks to get your money exchanged.
In a typical transaction in Panama, a local will not accept your non-dollar currency. Even if someone does, you’re opening yourself to a world of trouble. To start, you might get services with inflated prices because of your Euro. You’re opening yourself up to hucksters taking advantage of gullible tourists.
It’s best to stick to using the US dollar or whatever Panamanian Balboa that you have.
Currency Tips When in Panama
When in Panama, you will experience the use of both Balboas and US dollars. Here are a few crucial tips to maximize the use of both currencies for your needs.
The first thing to keep in mind is to prioritize the use of Balboas over US Dollars where you can. Many services will only cost you a few Balboas, with daily meals costing around 5 Balboas. If you can, try to exhaust your Balboas first.
Balboas are not a standard currency pair. It’s almost impossible to replace Balboas with money changers in other countries except for the United States and Central American countries.
In some places, people allow paying of both Balboa and Dollar. The reason is that their values are interchangeable and accepted as official currency. If you are short a few US dollars, supplement it with some Balboa to complete the transaction.
Always bring small bills with you. Bring $1 to $20 bills for your most basic transactions. Most services in Panama will cost you only a few dollars at most.
If you can, always have some form of identification ready when paying cash in Panama. Most businesses will not break $50 and $100 bills. They will ask you to provide proper ID to make sure the banknote is traceable to you.
For people who have credit cards, it’s expedient to use credit cards on big buys. Using cash for a big purchase can be a headache if you don’t have an ID with you.
Panama has two official currencies in circulation for its economy. It uses the Panamanian Balboa as its official local currency. It also uses United States dollars for different transactions.
The colorful history of Panama makes the US Dollar an older, more established currency in the country. The value of the Panamanian Balboa is always the same as the US dollar. Their money has the backing of the US dollar and is interchangeable in common parlance.
If you are going to Panama, it’s best to bring US dollars with you. Bringing other currencies would warrant going to a Casa Del Cambio or the airport. Transactions in Panama don’t accept foreign currency. We don’t recommend using foreign currencies to transact as it can short change you or give you problems.
Keep small bills with you when you can. Most businesses in Panama will not deal with significant currencies. If you want to pay for something expensive, a credit card can be a better option.
If you don’t have a credit card, pay in as small bills as it is possible. Prepare a valid ID like a passport if you plan on paying using big value banknotes.
On your next stay with Panama, you now understand why Panama uses the US dollar. Next time that someone asks you, you can tell them the same story. That sorts out one mystery out of your life.
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