Question

How does the value of a Panamánian balboa compare to that of a U.S. dollar, and why is this so? Write your answer in English.
(4 points)

Answer 1

The value of the Panamanian balboa is equivalent to that of the U.S. dollar. The reason for this is that the Panamanian economy is officially dollarized, meaning that the U.S. dollar is the legal tender in Panama. This decision was made in 1904 when Panama adopted the U.S. dollar as its official currency. The balboa is used only in coins, while the paper currency used in Panama consists of U.S. dollar bills. As a result, the value of the Panamanian balboa is pegged at 1:1 with the U.S. dollar.