With a population of 6m in an area the size of Massachusetts, El Salvador is a small country. But it is not an insignificant one. In the 1980s, its civil war drew the world's eyes. Having achieved peace and democracy a decade ago, it is now being closely watched by a more select group-aficionados of debates about exchange-rate policy. El Salvador is abolishing its currency, the colon, and adopting the dollar. If this succeeds in delivering higher growth, other Central American countries are likely to follow suit. Two other countries in Latin America also do without their own currency. Panama has used the dollar since it broke away from Colombia, with American support, a century ago. In 2000 Ecuador adopted the greenback, as a desperate measure to stave off hyperinflation. A third country, Argentina, came close to dollarising when its currency's one-to-one peg to the dollar was assaulted by the markets last year, and may yet do so.
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