Historical Sketch

During the Spanish colonial period, entire Central America was part of the Kingdom and General Captaincy of Guatemala, which itself was subordinate to the Viceroyalty of New Spain (Mexico). In the 1820s, it was briefly annexed to independent Mexico but became the Central American Republic in 1823. The confederacy consisted of five free states which enjoyed large autonomy. This led to its quick disintegration already in the late 1830s. The Free State of Guatemala was formed from the province of the same name of the Guatemalan general captaincy. In 1839, it left the confederacy, and the republic was proclaimed in 1847.

Monetary History Overview

Guatemala left the Central American Republic in 1839. The monetary system simply went on after that, no currency law was enacted in Guatemala for two decades. The mint still produced gold and silver coins in the name of the former federation until this was suspended in 1851. Everyday payment transactions were dominated by former Spanish colonial coins, often crudely hammered and of irregular shape, the so-called "Macuquina". Around 1840, the circulating coins were counter-stamped to combat the further inflow of debased or forged pieces. In 1853, the Guatemalan government enacted the first national currency law. The Guatemalan Peso was a bimetallic currency in the same standard as the one of the Central American Republic. However, it took another couple of years until the state found the means to actually issue coins, such that the old coins continued to circulate, including the sub-standard ones. In 1859, the national currency was finally issued, however, with a reduced gold-to-silver weight ratio compared with the 1853 law. In the following two decades the monetary standard changed several times. In 1869, Guatemala took over the Latin Monetary Union standard and decimalized the Peso. Two years later already, in 1871, gold got appreciated against silver, and the non-decimal subunits were restored. In 1881, the standard of the Latin Monetary Union was restored, and decimal and non-decimal subsidiary coins were issued concurrently. In the 1880s, several commercial banks began issuing paper money. Their issuance was not controlled by the state, which in combination with continued political instability, led to a paper money inflation in the late 1890s such that its convertibility was finally abandoned in 1899. A stabilisation of the currency situation had to wait until the 1920s, when also the political situation had calmed down. In 1925, the currency was reformed, and the Guatemalan Quetzal became the new unit. The new currency was at par with the US Dollar, and remained so until the mid-1980s, although the Quetzal was effectively inconvertible since the 1930s. In 1986, the Quetzal was devalued by 63% and three years later, the exchange rate got floated. It lost around 50% within two years and settled down into a slow but steady decline afterwards.

Guatemala joined the International Monetary Fund (IMF) on 28.12.1945 as a founding member.

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