Historical Sketch

The Spanish colonization of Central America began directly after the conquest of the Aztec Empire and the establishment of the New Spain (Mexico) colony. Guatemala became the seat of the Kingdom and General Captaincy which administered the territories under the auspices of the Viceroyalty of New Spain. In 1821, at the same time as Mexico, Central America (Guatemala) declared its independence and, following a short-lived absorption into the Mexican Empire, constituted itself as the federal Central American Republic, with the five former provinces as autonomous member states. The federation proved weak and inefficient, it disintegrated within less than two decades. The states of Costa Rica, Honduras, and Nicaragua seceded in 1838, followed by Guatemala in 1839, and, finally, El Salvador in 1841. In the 19th and early 20th century, there were several attempts to re-establish a common Central American state. However, they never succeeded in uniting more than four of the former member states, and all such unions were only short-lived.

Monetary History Overview

In 1823, five provinces of the colonial Viceroyalty of New Spain, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, declared themselves autonomous and united into . In March 1824, the federal Central American Republic enacted currency creating the Central American Peso as common currency for all of its members. The bimetallic standard of the Spanish colonial era was not changed. Only mint in Guatemala was able to produce specie coins in significant amount, as it was already in use before independence. Costa Rica and Honduras also open mints but had much lower output, while backwater El Salvador and Nicaragua had no such facilities. The Federation was never politically stable enough to assert monetary authority, and full-valued specie coins were the exception. Payment transactions were dominated by sub-standard coins, often crudely hammered and of irregular shape, the so-called "Macuquina". Local rulers in the free states contributed to the monetary disarray by freely issuing debased coins and even encouraging forgery. Repeated appeals by the federal government, in particular to El Salvador and Honduras, were ignored.

The federation gradually dissolved between 1838 and 1841, and the autonomous free states became independent republics. None of the successor states was able to create its own monetary system until the 1860s. The Central American Peso therefore simply went on. The Guatemala mint produced coinage in the name of the defunct Central American Republic until 1851, and the coins remained in circulation throughout the 19th century.

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