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On October 5, 1943 the Republic of Paraguay State Department, for advisers in related fields; adopted a new law which effects several im- and Mr. E. C. Johnson of the Farm Credit portant changes in the Paraguayan monetary Administration, Mr. Ormond E. Loomis of the system. These changes include the designation Federal Home Loan Bank Administration, and of a new unit, the guarani, which is equivalent. Mr. George R. Taylor of the Office of Price to 100 of the old paper pesos, or 31.5 United Administration were designated, respectively, States cents; the establishment of the new unit by their organizations as experts in agricultural on a "composite exchange standard"; and credit, mortgage credit, and price control. allocation to the central bank of control over The representatives of the Board were in the entire monetary issue, including coin as Asunci6n, the capital of Paraguay, during well as notes. September and October, 1943. At the invita- The basic monetary law which the new meas- tion of the Banco de la Republica del Paraguay, ure supersedes had not been revised since its the Banco de la Republica of Colombia gener- enactment in 1885 and the Banco de la Republica ously lent the services of one of its officers, Mr. del Paraguay, a Government institution which Enrique Davila, to cooperate with the repre- had its origin in a previous "Oficina de Cam- sentatives of the Board and to assist in setting bios/' has been hampered in performing central up new operating procedures in accordance with banking functions by the absence of powers banking practice in Latin America. Mr. Davila adequate to meet the problems of the present was in Paraguay during October, November, rime. and December. In view of this situation, the Government of Preparatory work already undertaken in the Republic of Paraguay and the Directorate Washington served as the basis for discussion of the Banco de la Republica began preparations in Asunci6n of three legislative projects: a some time ago for a general banking and mone- monetary law, a central bank law, and a general tary reform. Mr. Harmodio Gonzalez, General banking law. These projects were developed Manager of the Bank, was seat to the United in consultation with the directors and managers States in 1942. under the auspices of the Co- of the Banco de la Republica, the Ministry of ordinator of Inter-American Affairs, and spent Finance, and the managers of the commercial about twelve months in all at the United. States banks. Dr. Carlos A. Pedretti, President of the Treasury, the Federal Reserve Banks of New Banco de la Republica, exercised an active York and of St. Louis, the Board of Governors leadership in furthering the work, and upon of the Federal Reserve System, and at other completion of the monetary law he and Dr. Government agencies in Washington. After Rogelio Espinoza, Minister of Finance, who Mr. Gonzalez' return to Paraguay, his Govern- also took a special interest in the program, ment asked, through the State Department, sponsored the measure in the Council of State. that two representatives of the Board of President Higinio Morinigo promulgated the Governors be designated to advise the central monetary law October 5, 1943 and it went into banking authorities of Paraguay in the revision effect November 8, 1943. Drafts of the central of their monetary and banking laws. In accord bank and general banking laws are far advanced with its wish to help promote sound fiscal and and it is expected that they will be ready in the monetary policies, especially as an aid to good near future for submission to the Council of relations, the Board was glad to comply and State. designated two members of its staff, Mr. Bray In establishing a new unit, the guarani, the Hammond and Mr. Robert Triffin. The Para- monetary law terminates a situation in which a guayan Government also asked, through the hypothetical t4gold peso" (peso oro sellado)
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persisted as a unit of account while the unit in silver moneys of the Argentine Republic.'f The actual circulation continued to be the paper second article declared that "the gold pieces of peso Qpeso curso legal or peso fuerte); and in which 8 grams and 645 ten-thousandths (8.0645 grams) both were pegged to the Argentine paper peso. by weight and 900 thousandths fine shall be The new law has also the effect of eliminating worth 5 full pesos Qpesos juertes), the fractions the wide margin on dollar transactions which thereof having their corresponding value.*' had followed appreciation of the Argentine The Argentine gold peso to which this law peso and had reached a maximum of nearly 10 refers had been established in that country by per cent during the last year before the new law monetary law No. 1130 of November 5, went into effect. The margins between the 1881. It was defined as having a gross weight buying and selling rates of foreign currencies of 1.61Z9 grams, 0.900 fine, i.e. a fine gold are now unified and those on the more important * content of 1.45161 grams. On that basis, the currencies are quoted in the daily press in legal monetary unit of Paraguay would be Asunci6n.x Discussion of these and other equivalent to 0.9648 pre-1934 dollars, or about features of the law, including the mechanics 1.63 current dollars of the United States. of the "composite exchange standard/1 will Two different Paraguayan monetary units be found in the explanatory statement which is developed from the monetary law of 1885; one printed with the law in the following pages. was the paper peso, called the peso fuerte or Besides preparing the text of the new legisla- peso curso legal (peso c/1), i.e. peso of legal tion, the Banco de la Republica del Paraguay, in tender, and the other was the gold peso or peso consultation with the representatives of the oro sellado (peso o/s), i.e. peso of coined gold. Board and of the Banco de la Republica of Col- No Paraguayan gold coins were ever minted, ombia, has made many changes in administrative and very few silver coins, but. paper money was and accounting practice called for by the new issued under various regimes and constitutes responsibilities the central bank will have under today, together with subsidiary coins, the only the new legislation that has gone into effect or legal circulating money of the country. A is contemplated in the near future. These series of devaluations progressively lessened the include procedures for introducing the guarani value of the monetary unit. The last definition into circulation in place of the old peso, of the peso curso legal, or paper peso, February establishment of a clearinghouse in Asunci6n, 10, 1941, gave it an equivalence of — of the and preparation for a system of bank inspection. Argentine peso and this rate has been maintained The official statement on the monetary law up to this date by the Banco de la Republica. and the text of the law itself, as translated from The present dollar equivalent is about 308 pesos the original Spanish documents, are given per U. S. dollar, or 0.3x5 U. S. cents per peso. below. The gold peso, or peso oro sellado, became a mere money of account, born historically of two STATEMENT ON THE MONETARY LAW different factors: the actual circulation of Ar- gentine currency in Paraguay and the desire I- THE MONETARY SYSTEM OF PARAGUAY of creditors to protect themselves against the The basic monetary law of Paraguay dates progressive depreciation of the Paraguayan back to July 14, 1885. The first article of that paper peso. The peso oro sellado, as indeed the law gave legal tender quality to "the gold and peso curso legal, was originally equal to the Argentine peso. Contracts in gold pesos were,
1 The new rates as quoted by the Banco de la Republica on Monday, for all intents and purposes, equivalent to con- November 8,1943 were as follows in guaranfes per unit of foreign cur- rency: tracts in Argentine currency. Legal Buying Selling Rate Rate Rate This would have constituted a "gold clause" Argentine peso 0.7700 0.7620 0.7780 Cruzeiro 0.1615 0.1600 0.1631 if it had not been for the devaluation of the Dollar 3.0720 3.0410 3.1030 Sterling 12.3200 12.2000 12.4400 Argentine peso itself. In the same year 1885, JANUARY 1944 43
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however, in which Argentine currency of gold not gold, since its relation to gold fluctuated and silver was made legal tender in Paraguay, with the Argentine paper money. And, finally, Argentina suspended convertibility, and after it was never coined in Paraguay and it ceased the banking crisis of 1890 the Argentine peso to be coined in Argentina even before its estab- underwent a rapid depreciation which led to lishment as the Paraguayan currency unit by the currency reform of 1899. The Argentine the law of 1885. The term "oro sellado" has paper peso was officially fixed at 44 per cent generally been used to accomplish the purpose of the gold peso (4X.45 U. S. cents) and the of a foreign exchange clause protecting the Caja de Conversion was authorized to pay out creditor against the depreciation of the Para- gold in exchange for legal tender notes at the guayan paper peso vis-a-vis the Argentine paper rate of 44 centavos for one paper peso. In currency. practice, all domestic transactions in Argentina Further complications have arisen, however, were conducted in paper pesos called moneda in the legal and the de facto interpretation of the national (m/n), the gold peso (o/s) being used meaning of the peso oro sellado, or gold peso. mainly as a unit of account, especially in foreign . First of all, the customary interpretation of the trade statistics. With the outbreak of war in oro sellado came to be sanctioned by a number 1914, the convertibility in gold was again of Paraguayan legal and administrative texts. suspended and the exportation of gold pro- These texts have not defined the oro sellado hibited (laws of August 9 and September 30, directly in terms of Argentine pesos, but in 1914). Gold payments were resumed at the terms of the, peso curso legal. The rate, how- old rate by presidential decree effective August ever, was always determined in such a way as ii, 192.7, but were again suspended on December to confirm the customary relationship of 1 to 11, 19x9. The paper peso fluctuated on the ex- X.X7X7 . . . between the gold peso and the change and is now traded at about X5 U. S. cents. Argentine currency. Thus from August 1937 The gold peso continued, as a mere money to February 1941 the official exchange rate on of account, to represent ~^i = X.X7X7 . * . Buenos Aires was 70 Paraguayan paper pesos paper pesos, irrespective of the fluctuations per Argentine peso and the conversion rate of of the peso with relation to gold. About oro sellado into curso legal was 1 to 159.09. In 10 years ago, Argentina finally discarded the February 1941, the Argentine exchange was gold peso even as a money of account and all raised to 77 and the conversion rate was simul- statistics are now expressed uniformly in paper taneously redefined as 175. Thus, in fact, the pesos. In Paraguay, however, the denomina- Paraguayan gold peso remained pegged to the tion "oro sellado" still survived, not only in Argentine peso at the rate of 159.09/70 = private and official statistics, but even in the J75/77 — 2.-2.7x7 . . . Argentine pesos per Para- writing of many contracts and in the deter- guayan gold peso. The important point, how- mination of certain taxes and impositions. The ever, is that if the Government's right to define customary meaning of the peso oro sellado has the gold peso in terms of paper pesos is recog- continued to be based on the Argentine law of nized, it would seem within the power of the 1899, i.e. on the relation of ^7^ = 1.2.7x7 . . . Government to maintain or to change, at will, to the Argentine peso. This made the gold peso the customary relation of the gold peso to the worth about 0.58 of a U. S. dollar, as compared Argentine currency. with a theoretical gold par of about 1.63 It might be maintained that the customary dollars. relation of 1 to X.X7X7 ... is binding upon the Thus the peso oro sellado, or peso of coined Government itself, but all modern trends run gold, now being superseded, was not a peso, directly counter such a theory. Even the gold whether Argentine or Paraguayan, but a clauses, which were far more rigid and precise multiple of the Argentine currency. It was than the oro sellado clauses, have in most
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countries been set aside by legal and judicial II. THE MONETARY REFORM decisions. In Paraguay itself, the exchange The new monetary law attempts to clarify control legislation now prohibits the use of the confused situation now in existence and foreign moneys or devisen in all domestic trans- to reconcile the legal and the de facto status of actions and obligations and "all such transac- the Paraguayan currency. tions and contracts must be made in money of legal tender \inoneda de cur so legal, i.e. paper A. Elimination of the Peso Oro Sellado pesos]" (Art. 190 of Decree-Law No. 5017). First of all, the law brings to its logical Secondly, if the official definition of the gold conclusion the evolution begun by the exchange peso were accepted as binding upon the parties control legislation of 1941 and unifies the cur- to a contract, the result was that the denomina- rency through the final elimination of the tion of the contract in gold pesos afforded money of account denominated "peso oro protection against official, but not against sellado** or gold peso. The legal and real unofficial, devaluations of the paper peso in status of that unit is so confused as to be thor- terms of the Argentine currency. Thus the oughly incomprehensible abroad and even in market rate of the Argentine peso, in the days Paraguay and its juridical interpretation is so which preceded the introduction of the ex- doubtful as to give rise to lengthy and costly change control legislation of February 1941, litigation. Its only raison d'etre was, in the had risen above 90. Therefore the official past, to offer a monetary standard endowed with Paraguayan gold peso was worth in fact not a greater degree of stability than the paper peso. 159.09/70 = 2..2.72.7 . . . Argentine pesos, but It is questionable, however, whether the State only 159.09/90 = 1.7677 , . . Argentine pesos. itself should sanction such a practice and Finally, there have existed a number of taxes should in this manner throw doubts upon the and impositions expressed in gold pesos and stability of its money and encourage the use payable in paper pesos at conversion rates dif- of what is, in fact, a foreign currency standard ferent from the official conversion rate of 175 in the writing of purely domestic contracts. paper pesos per gold peso. For instance, 50 Moreover, the exchange control legislation now per cent of the import duties have been liqui- in force already prohibits the use of foreign dated at a conversion rate of 79.5454 while the moneys in domestic transactions and obliga- other 50 per cent have been calculated at the tions and prescribes the exclusive use of the rate of 175. Still other rates have been used for paper peso in such transactions and obligations. the payment of telephone and electricity bills. Finally, the new monetary law defines clearly To summarize: the gold peso has been worth, the obligation of the Banco de la Republics, in principle, 175 paper pesos, or z.2.72.7 . . . to maintain the external stability of the na- Argentine pesos. The conversion rate of 1 peso tional currency. The present strong position oro sellado to 2..Z72.7 , . . Argentine pesos derives of the Bank gives every reason to believe thar from custom and tradition, but since it is also, this mandate will be effectively observed. in an indirect manner, sanctioned by law, it All future prices, contracts, and obligations of would seem that the law could establish a a purely domestic nature wilt be written and different rate if the Paraguayan authorities felt liquidated in the national currency of the coun- it advisable. Differences between the official try. Exceptions are provided for existing con- and the market rates of exchange have in the tracts and obligations, which will be liquidated past produced rates of conversion different from in national currency at the selling rate of the the traditional rate of ^.2.72.7 . . . Finally, Banco de la Republica on the day of liquidation, 0 special conversion rates are also established by in accordance with article 19 of Decree-Law legal and administrative texts for the liquida- 5017 of February 10, 1941. Contracts which are tion of certain duties and impositions. not of a purely domestic nature may be expressed JANUARY 1944 45
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directly in the relevant foreign currency, but the but of a long history of progressive devaluations peso oro sell ado will disappear entirely from all forced upon the monetary authorities by foreign legal and contractual texts. and civil wars and by the unprecedented severity Thus Paraguay will, after many years, reaf- of the economic crisis of 192.9. The official gold firm its monetary independence and sovereignty parities of the American currency units with and establish a new national currency in a clear relation to the pre-1934 U. S. dollar aver- and precise form. aged about 59 cents and their actual parities B. The Strengthening of the National in December. 1919 about 58 cents. In terms of Currency Unit the current dollar, this is equivalent to about one dollar, or more than three times the value of The microscopic value of the present paper the new Paraguayan currency unit as defined by peso has made it a unit totally unfit for transac- the present law. A conversion on the basis of tions of any but the smallest import. This has 10 to one would make the Paraguayan unit the been a source of serious inconvenience and of equivalent of only one-thirtieth the average unnecessary costs in accounting and in all value of the American currency units as defined monetary payments. The Paraguayan public, accustomed to count in thousands and millions either by their official gold parities or by their of pesos, has lost respect for the old currency actual market rates of exchange before the ac- unit of the country, and the use of the Argentine cidental devaluations brought about by the currency, at least as a money of account, has been economic crisis of 192.9. general in all transactions of some importance. Even if we take as a criterion the present rates This has injured the prestige of the national of exchange, which, as was mentioned earlier, currency both at home and abroad and has be- are not the result of conscious choice or of come at times a real obstacle to the development organic monetary legislation but of a long series of thrift in the country. of historical accidents, the new Paraguayan unit The need for a new basic monetary unit has would be worth little more than two-thirds of been generally recognized in the country as the average value of the American currencies in imperative. The only question is whether the terms of the current U. S. dollar. A unit estab- new unit should be established as the equiva- lished on the basis of a conversion rate of 10 lent of ioo paper pesos or of 10. to one would be worth somewhat more than There is one logical answer to this question. one-thirteenth of that average. The 1885 gold In practically every country in the world, the parity was about five times as great as the new basic monetary unit has been established as the parity at the rate of 100 to one and about 50 centuple of the smallest currency unit actually times the parity which would result from a rate used in transactions, the latter unit being given of 10 to one. the name of cither "centavo," or "centimo," or The choice of a rate of 10 to one would have "centisimo," or "cent," or "centime," etc. had another paradoxical result. The division The smallest currency unit effectively used in of that new unit into 100 centimos would Paraguay has been the peso. The basic mone- remain a dead letter, since the centimo (equiva- tary unit should thus be made equal to ioo lent in this case to 10 actual centavos of the pesos. A rate of 10 to one would be only peso curso legal) would not circulate in fact in a half-hearted measure. It would eliminate the country. The new legislation would in none of the evils mentioned above and would this case have created a new unit which the leave the Paraguayan currency the smallest country would never have occasion to use or currency unit by far in all the Americas, with coin, the smallest circulating unit being not the single exception of Bolivia. the centimo but the 10 centimo piece. It must be borne in mind that the present low It is sometimes argued in Paraguay that the rate of some American currencies is not the result size of the monetary unit should be governed of choice or of an organic monetary legislation, by the physical or the foreign exchange resources
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of the country. On the contrary, one of the gold. In fact, however, this definition is in richest countries in both respects is Venezuela, most countries a legal fiction rather than a whose monetary unit, the bolivar (about 2.9 practical reality. Paper money has universally U. S. cents), is appreciably below average, while taken the place of the old gold currencies and Honduras has a monetary unit, the lempira exchange control legislation has divorced the (50 U. S. cents), which is stronger than the national monetary systems from any real inter- average American unit. national monetary standard. Paraguay regrets The only real objection to a rate of 100 to one such a situation and affirms unequivocally in is the fact that in the transitional period which article 1 of the monetary law its determination immediately follows the reform the Paraguayan to seek, in collaboration with other nations, the public, now used to count prices and salaries reestablishment of an international monetary in thousands of pesos, may be somewhat con- standard. fused by the change to a stronger unit. There In the meantime, the monetary law attempts will undoubtedly develop some psychological to reconcile the legal texts with the realities of factors tending toward an increase in prices. the present situation and to ensure the money But similar difficulties would have to be met of the country the maximum degree of stability by any monetary reform, whatever the rate of compatible with present disturbed conditions. equivalence it established between the old and The law establishes two criteria in this respect: the new currency. They are the ineluctable the criterion of external and the criterion of legacy of the past devaluations of the internal monetary stability. Paraguayan currency. A thorough educational In the absence of an international monetary campaign will be necessary to clarify the real standard, external stability is defined in terms meaning of the conversion. The new centimo is equal in every respect to the old peso and of those foreign currencies which most affect there would be no justification whatsoever in the balance of international payments of the the monetary reform itself for any price increase country. As long as these currencies maintain in Paraguay. The transition will be made the same relation vis-a-vis one another, the easier by the coexistence for some years of guarani will remain stable with relation to all moneys denominated in pesos and moneys and every one of them. If, however, these denominated in the new unit established currencies display divergent movements at some by the law. future time, the Banco de la Republica will The conversion to a new unit must, in order decide, in the light of the circumstances of the to avoid confusion, be accompanied by a change moment, on the course of action which will in the name of the currency. After mature bring the least disruption to the Paraguayan consideration of the problem, the Paraguayan economy. The Paraguayan currency will, at authorities have decided on the designations such time, be pegged to one or the other of the "guarani" and "centimo." The guarani will 'main currencies influencing the balance of inter- be equal to 100 pesos and the centimo to one national payments or be steered to an interme- peso. The name guarani derives from the racial diate course. origins of the Paraguayan nation. The name This system of a "composite exchange stand- centimo will establish a clear distinction be- ard" is the best approximation available at tween that unit and the old centavo. " present to a full-fledged international monetary standard. Any other arrangement would bring C The Monetary Standard: The Composite less, rather than more, stability to the monetary Exchange Standard system of the country. The immediate adoption of a fixed relation to gold would be premature, Practically every currency in the world is defined today in terms of a certain weight of especially in a country which produces none
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and owns little of that metal, at a time when weapon not only against shortages of foreign gold is impeded from performing its traditional exchange but also at other times against the functions as an international monetary standard. inflationary impact of an excessive inflow of On the other hand, a direct pegging of the foreign exchange. Modifications of this char- guarani to a definite foreign currency would acter will be proposed later either independently constitute a gamble, as the economic and or in connection with the new organic law of political developments arising from the present the Banco de la Republica. war impart, or may impart at any moment, to D. Unification of Monetary Responsibility any one of the main foreign currencies to which the Paraguayan unit could attach itself, move- The new monetary law reaffirms the status of ments of its own unrelated either to world the banco de la Republica as the sole bank of economic trends or to the circumstances of the issue in Paraguay. This is a principle uni- Paraguayan economy. versally accepted in modern monetary theory The criterion of internal price stability has and legislation. been proposed by some eminent writers as an The Banco de la Republica is made solely alternative to the traditional criterion of ex- responsible not only for the main monetary issue ternal currency stability. Whatever the merits but also for the so-called subsidiary or minor or demerits of this theory, overwhelming politi- issue. A distinction between the two may cal and practical obstacles would prevent its have had some logic in the past, owing to the complete adoption in most countries and espe- fact that most banks of issue were private cially in Paraguay. The monetary authorities, institutions, more or less independent of the however, are directed by article 2. of the present State. The Banco de la Republica, however, is law to use all the means at their disposal, strictly a State institution and should be en- within the basic framework of the external dowed with full responsibility for the whole stability of the guarani, to combat abnormal monetary issue whatever its denominations. movements of a monetary character in the This arrangement is clearly imposed by the logic level of internal prices. The new organic law of the situation and by the need for modern and of the Banco de la Republica will endow that efficient currency management. institution with the extensive weapons of control necessary to carry out this mandate. III. CONCLUSION The new law makes no essential change in The new organic monetary law of the Republic the exchange control system introduced in of Paraguay puts an end to a long period of February 1941 by Decree-Law 5017 and modified monetary confusion and instability. It provides in February 1943 by Decree-Law 17070. All the country with a modern monetary system in independent observers agree with the Para- . full accordance with the realities of the times. guayan monetary authorities in considering that It will now be for the political and monetary this legislation has been extremely beneficial authorities of the country to carry out the to the country and to the stability of its cur- intention of the' law to give Paraguay the rency. This does not mean that the present modern and stable currency which is the first exchange control legislation can not be improved prerequisite of orderly economic and social in any direction. Its present provisions bear progress in the country. Two other impending the mark of the historical circumstances which laws, the general banking law and the organic led to its adoption. The law should be revised law of the Banco de la Republica, will facilitate in such a way as to make it a more flexible this task and constitute the indispensable com- instrument of monetary policy, to be used as a plement of the present monetary reform.
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DECREE-LAW NO. 655 The Bank, in addition, shall take all measures ON THE ORGANIC MONETARY REGIME necessary to combat abnormal fluctuations of a OF THE REPUBLIC OF PARAGUAY monetary character in internal prices. October 5, 1943, Article 3. All the prices, taxes, assessments, CONSIDERING : fees, wages, salaries, contracts and obligations, (1) That the public interest requires that an of any kind whatsoever, which are to be paid, end be put to the long period of monetary collected, or executed in the Republic, must confusion and instability which has been the be expressed and liquidated exclusively in source of so much harm to the country; guaranies. (1) That the preliminary step of this reform Any modifying or restricting clause which has been accomplished with the stabilization imposes payment in silver or gold metal, coined reached as a result of the effective application of gold, foreign moneys or devisen, or any mone- Decree-Laws No. 5017 and 17070 on exchange, tary unit other than the guarani shall be void control; and without legal effect. (3) That the institution of a new monetary Excepted are: unit based on modern and realistic principles a) Obligations requiring payments from Para- constitutes an indispensable prerequisite for the guay abroad or from abroad to Paraguay; economic and social progress of the Nation; b) Remunerations to foreigners domiciled (4) That it is necessary to secure for the new outside of Paraguay for temporary services in unit the maximum external and internal stability the country; compatible with the present international mone- c) Obligations to institutions of public law tary situation; which, in application of special laws, must be (5) That it is necessary to unify the monetary paid in foreign currency or exchange or in specie. issue and responsibility and to strengthen the Ankle 4. The Bank of the Republic of national monetary unit; Paraguay is exclusively authorized to issue notes (6) That it is indispensable for Paraguay to and coins in the national territory, with the reaffirm her monetary independence and sov- guarantees and limitations established in the ereignty; pertinent legal provisions. The opinion of the Honorable Council of No other institution or person, public or State having been heard; private, may put into circulation notes, coins, or any other instruments which, in the opinion THE PRESIDENT OF THE REPUBLIC OF PARAGUAY of said bank, might circulate as money. DECREES WITH FORCE OF LAW *. Article s- The notes and coins of the Bank shall have unlimited legal tender and cancelatory Article 1. The "guarani" is established as force throughout the national territory. the monetary unit of the Republic of Paraguay. Article 6. The Bank of the Republic of The guarani .is divided into 100 equal parts Paraguay is obliged, at the request of any person called "centimos." Its symbol is a barred or institution, to deliver and accept without letter "G." limit its own notes and coins in exchange for Article 2. As long as international monetary foreign moneys or devisen, at the rate or rates conditions do not permit of another solution, established by the Bank in accordance with the Bank of the Republic of Paraguay shall Article z of this Decree-Law. maintain the stability of the guarani with Article 7. The application of this Decree-Law relation to the currencies which most influence shall be limited by the legal provisions of the balance of payments of the country, using exchange control now in effect or which may be as the initial basis the exchange rates prevailing established in the future for reasons of general at the time this Decree-Law enters into effect. interest.
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The special rates now in effect or which might from January 1, 1945, the coins denominated be established in the future may not differ by in pesos fuertes shall cease to have legal tender more than 15 per cent in cither direction from and shall be exchangeable at par only by the the rates of exchange fixed in accordance with Bank of the Republic of Paraguay until Decem- Article z. ber 31, 1945; from January 1, 1946, they shall be Article 8. The Bank of the Republic of completely demonetized. Paraguay shall determine the classes, kinds, Article 12. The subsidiary issue, now at -composition, engraving, inscriptions, and other charge of the National Government by virtue characteristics of the notes and coins, in agree- of Decree-Law No. 9408 of October 15, 1941, is ment with the Ministry of Finance. transferred to the Bank of the Republic of All printing and minting expenses shall be Paraguay. The Government shall deliver to the at charge of said Bank. Bank a noninterest-bearing bond in the amount of said issue. TEMPORARY PROVISIONS Article 1$. The difference which is revealed, Article g. The Bank of the Republic of after completion of the redemption, between Paraguay shall replace all present notes and the new guarani issue and the present issue shall coins by stamped or new notes and by coins be applied to the amortization of the bond denominated in the unit adopted by this Decree- mentioned in the preceding article and the Law. The replacement shall be at the rate of balance shall be applied to the amortization of one guarani for each 100 pesos fuertes and one the bonds of the Guaranteed Internal Debt.1 centimo for each peso fuerte. Article 14. During the periods established in Article 10. Holders of notes denominated in Articles 10 and 11, in which peso fuerte notes pesos fuertes are obligated to exchange them and coins and guarani notes and coins will have before January 1, 1946, for stamped or new legal tender simultaneously, all prices, taxes, guarani notes. After this date the present assessments, fees, wages, salaries, contracts, unstamped peso notes shall cease to have legal and obligations of any kind whatsoever which tender and shall be exchangeable at par (one must be paid in national money may be paid, guarani for each 100 pesos fuertes and one collected, executed or liquidated in pesos fuertes centimo for each peso fuerte) until December 31, or guaranies, without distinction, at the rate of 1947, at the Bank of the Republic of Paraguay equivalence established in Article 9. only. From January i, 1948, the unstamped Article if. The use of the unit of account peso fuerte notes shall be demonetized. called "peso oro sellado" is prohibited. All Stamped notes must be exchanged for new notes denominated exclusively in guaranies amounts expressed in pesos oro sellado prior to between January 1, 1946, and December 31, 1947; this Decree-Law in any kind of document, after this date they shall cease to have legal obligation, assessment, or tax are converted to tender and shall be exchangeable at par only at guaranies at the rate of one guarani and 75 cen- the Bank of the Republic of Paraguay until timos for each peso oro sellado. Excepted are December 31, 1949; from January 1, 1950, these those cases in which special rates have been notes shall be demonetized and only the notes legally set for converting pesos oro sellado; in denominated exclusively in guaranies will re- such cases the equivalent in guaranies shall be main in circulation. calculated by applying these special rates for Article 11. Holders of coins of the present conversion into pesos fuertes and by then con- issue must present them for exchange at par verting into guaranies at the rate of one guarani (one centimo for one peso fuerte) for new cen- for each 100 pesos fuertes. timo coins from the time such an exchange
procedure is initiated until December 31, 1944; 1 Those bonds are held by the Bank of the Republic of Paraguay. 5° FEDERAL RESERVE BULLETIN
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NEW MONETARY AND BANKING MEASURES IN PARAGUAY
Article 16. All accounting operations must be ioo pesos fuertes and of one centimo for each expressed in guaranies except those relating to peso fuertc. Any attempt to take advantage the legally authorized exceptions, which may be of the application of this Decree-Law in order entered in the respective foreign currencies. to increase prices shall be punished by the General balance sheets and profit and loss Department of Industry and Commerce of the statements shall be expressed exclusively in Ministry of Commerce and Industry with a fine guaranies. The conversion shall be made at of from 50 to 5,000 guaranies. If the offense is the rates fixed by the Bank of the Republic of repeated, the same Department may order the Paraguay. This Article shall apply from the closing of the commercial establishment for a first accounting year initiated after this Decree- period of from 15 days to three months without Law becomes effective. prejudice to the imposition of the corresponding Ankle iy. Those who in any way counterfeit fine. the stamping of notes, authorized exclusively Ankle 19. The present Decree-Law shall be- to the Bank of the Republic of Paraguay, shall come effective 30 days after its promulgation. be punished by a term of from four to eight Ankle 20, A report shall be made at the years in a penitentiary. The same penalty shall first opportunity to the Honorable Chamber of be imposed on anyone who cooperates willfully Representatives. with the counterfeiters or their accomplices by Article zt. This Decree-Law shall be com- passing or introducing into the Republic any notes with counterfeit stamping. municated, published and made available to the Official Register. Ankle 18. The present prices now expressed in pesos fuertes shall be converted into guaranies (Signed) HIGINIO MORINIGO M. and centimos at the rate of one guarani for each R. ESPINOZA
JANUARY 1944
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