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5 countries where the USD is commonly accepted

Investopedia logoInvestopedia 31-07-2016 Thom Tracy
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Numerous countries have elected to use U.S. currency rather than their own. The phenomenon, known as dollarization, often results from a developing nation’s sovereign currency growing so weak that the U.S. dollar is adopted as a substitute. Dollarization takes place in unstable economies that have high rates of inflation. By accepting the U.S. dollar for transactions and holding it as an inflationary hedge against their own currencies, foreign countries participate in unofficial currency substitution.

Dollars can be used to purchase goods and services, but the U.S. currency does not supplant the nation’s domestic means of exchange. Full dollarization occurs when a nation no longer issues its own currency and treats the dollar as legal tender. One advantage to dollarization in emerging markets is the facilitation of trade with the country that issues the currency. However, if the host nation’s economy continues to stumble after the conversion, that country may incur significant debt at the hands of foreign central banks. In the following five nations, the U.S. dollar is commonly accepted for transactions.

Ecuador

Americans traveling in Ecuador have no need to worry about currency conversion fees and exchange rates. In 1999, shaken by a decline in oil prices, the Ecuadorian sucre had lost about 82% of its value. Past President Jamil Mahuad, in January 2000, declared a state of emergency after which its central bank president resigned and the sucre was officially jettisoned for the U.S. dollar. In 2015, 85% of Ecuadorians continue to favor dollarization, but the strength of the U.S dollar and another bout of depressed prices in crude, the country’s main export, have put more pressure on the economy.

Panama

Panama’s use of the U.S. dollar in addition to its Panamanian balboa dates back to 1903, when the nation declared independence from Colombia. The dollar was a natural choice for the country, as U.S. firms designed and built the 50-mile Panama Canal, finishing in 1914 after failed French attempts in the 1880s. The dollar is accepted in Panama at par or at an exchange rate of one to one. Two official currencies allow U.S. travelers the convenience of using dollars freely for Panamanian goods and services.

Vietnam

The official currency of Vietnam is the dong, which was established in 1978, three years after Saigon fell to North Vietnam and became Ho Chi Minh City. In Vietnam, taxi drivers, hotels and restaurants accept U.S. dollars, though the State Bank of Vietnam has sought to choke the vast supply of U.S. dollars floating around the developing nation. Merchants are fined for listing prices or receiving payments in U.S. dollars, only 80 of which fetches a luxury hotel room in Da Nang or Hanoi.

Belize

The Belizean dollar is exchanged for U.S. dollars at a rate of two to one. Visitors carrying dollars do not need to exchange currencies upon arrival. Prices are listed in Belizean dollars, and most businesses gladly accept U.S. dollars as payment, but change is given in the native currency. Tourists are advised to have a firm grasp of exchange rates, as the Belize dollar uses an identical symbol to the U.S. dollar. Travelers can only bring a maximum of 5,000 USD, and amounts must be declared at customs.

Zimbabwe

In combination with the U.S. dollar, Zimbabwe also uses the South African rand, Chinese yuan and euro in its multi-currency system. A faltering economy and extreme hyperinflation has led to the African nation to substitute its dollar for the U.S. dollar since 2009, when prices for goods and services often changed by the minute. A strengthening dollar against the rand in 2015 slowed tourism in the country, whose projections of 3 million visitors proved overestimated by about one-third.

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