(How) does the American dollar's decline affect its use in other countries?

[pasunejen]

Specifically, in places where it’s used as a black market currency.

For example, my father and brother told me that when they were in Cuba, the people they were paying much preferred dollars. I’m pretty sure I’ve heard of dollars being in circulation in other countries where they’re not actually the official currency, but I can’t come up with any of them off the top of my head.

So, anyway, does the decline of the dollar affect its use in these cases, or no? If so, how?

[Wakinyan]

I don’t know, but I just ordered the Plant & Krauss from Amazon.com instead of from a site in my own European country, since it’s 30% cheaper (postage including).

[Sunspace]

I was wondering about this as well. I think there is at least one non-US country where the US dollar is officially used. (Ecuador?)

[Desert_Nomad]

In my travels, the US Dollar has been an accepted 2nd currency in Iran, Syria, Yemen, Lebanon, Uzbekisan, Cambodia, Laos, Rwanda, DR Congo, Uganda and probably a few others. In recent times, Euros seem to be in much higher demand and in a few cases US Dollars have been refused outright where they had been accepted in the past.

I imagine the same is true of the Sudan… I have never been there, but am going soon and will be taking Euro.

[Balthisar]

@Sunspace

I was wondering about this as well. I think there is at least one non-US country where the US dollar is officially used. (Ecuador?)

Liberia, if I remember correctly.

[silenus]

Panama.

[GorillaMan]

@Balthisar

Liberia, if I remember correctly.

East Timor’s another one, also if I remember correctly!

[Freddy_the_Pig]

Panama, El Salvador, and Ecuador use the dollar as legal tender within their own countries. Other countries such as the Bahamas and Belize issue a currency which is freely interconvertible with dollars at a fixed exchange rate, managed by a currency board. In still other countries (such as Cuba), dollars have no official status but circulate widely because they are (or at least were!) more stable than the local currency.

In general, as the dollar declines, its more informal circulation will begin to dry up first. For an early examination of this phenomenon, see Why drug dealers prefer Euros:

(N)ow there are signs that we’re losing some of the most devoted fans of the greenback: drug dealers, Russian oligarchs, and black-market traffickers of all kinds. . . . Fidel Castro declared that the dollar, which is tolerated as a means for Cuban-Americans to support their relatives in Cuba, was officially currency non grata and that the euro was most welcome.

For most products, losing international drug cartels and corrupt Third World dictators as customers would seem to be a desirable outcome. But these guys represent part of our long-standing and faithful base. If you think pundits are fretting about the slumping dollar now, just imagine what might happen if we start to lose the arms dealers.

I don’t know whether the countries which have dollarized or pegged their currency to the dollar will ever change. It’s too early to tell.

[T_SQUARE]

Cuba doesn’t use dollars anymore. They have a “Convertable Peso” that used to be 1:1 with the dollar, but was changed to 1.08:1 (dollars to c. pesos). So, there is an official exchange rate that the government can fool with on a whim. (Keep in mind the average Cuban citizen probably won’t have much dealings in convertable pesos at all) Furthermore, if you bring dollars into the country to exchange, they are subject to a 10% haircut off the top before any exchanging is even done. If you are going to Cuba, consider Euros.

[pasunejen]

Some very interesting answers, here. Thanks, everyone!

[SmackFu]

In Costa Rica, dollars are generally accepted everywhere. Their local currency (colones) is roughly pegged to the USD, so it doesn’t matter. Anyways, practically, the exchange rate is considered to be 500:1.