Historical Sketch

In the 16th century, the Spanish possessions in Peru were gradually extended southward. The newly conquered lands were consolidated into the Viceroyalty of the Rio de la Plata in 1776, consisting of the three audiences of Buenos Aires, Charcas, and Santiago. The latter proclaimed the autonomous Kingdom of Chile in 1810, and in 1813 began the war for independence in the other part. In 1825, the northern provinces of Rio de la Plata seceded formed the Republic of Bolivia, while the other provinces ultimately united into Argentina. In 1836, Bolivia was conquered by neighbouring Peru which gave rise to the short-lived Peruvian-Bolivian Confederation. Three years later, it disintegrated again, but the territorial conflicts between Bolivia and its neighbours went on. Gradually, half of the territory was lost. In the War of the Pacific ("Saltpeter War") in the 1880s, the coastal areas were conquered by Chile, making Bolivia landlocked, and in the Chaco War of of the mid 1930s the entire south-east went to Paraguay, which in turn almost doubled its size. The 20th century was dominated by political instability and military dictatorship. The democratic development that began in the 2000s also brought more weight to the pre-Columbian cultures and history, which culminated in the 2009 constitution that defined Bolivia as a Plurinational State.

Monetary History Overview

The Bolivian Constituent Assembly passed a national coinage law directly with the 1825 declaration of independence, which led to the creation of the 1st Bolivian Peso in January 1827. The bimetallic standard of the colonial period was taken over without change. In every day's payment transactions, however, full weighted gold or silver coins were scarce. In 1829, the government debased the silver coins, creating the so called "moneda feble", which then quickly displaced the full-weighted specie. The remediation of the coinage began in 1859. In a first step, the debased silver coins were to be withdrawn and exchanged at par into new regular coins. The few remaining specie coins circulated at silver value. However, the state did not have the means to fully implement the reform such that in large parts of the country the "moneda feble" remained in circulation until the 1880s. In 1864, as the second reform step, the 1st Bolivian Boliviano became the new currency unit. Nominally in the bimetallic standard, it was in fact a silver currency as no gold coins could ever be produced. In the late 1860s, several commercial banks began issuing paper money, among them the state-owned National Bank which opened for business in 1872. Paper money quickly displaced silver specie in the payment transactions. In 1914, the Bolivian Central Bank began operations, and the money issuance through commercial banks was abolished. Already in 1908, value of the Boliviano had been pegged to gold and the Pound Sterling. The stabilization was suspended by the outbreak of the First World War, but the Boliviano could almost recover its original value in 1928, when it got re-pegged to gold and Sterling. This was of short duration only, as the gold standard was abandoned for good in 1931. What followed was an 85% decline of the currency value during the 1930s. After the Second World War, the Boliviano was devalued by another 40% and pegged to the US Dollar. The stabilization failed, two massive devaluations were done in the 1950s, followed by the floating of the exchange rate in December 1956. The hyper-inflationary surge that had destroyed 99% of the currency value, could be stopped in January 1959. The renewed Dollar peg proved successful, and a currency redenomination was carried out in January 1963. Three zeros were cut, and the 2nd Bolivian Peso became the new currency unit. It remained stable for the next decade. In 1972, a first devaluation had to be carried out, followed by further devaluations at shorter and shorted intervals and increasing rates. In the mid-1980, the second Bolivian hyper-inflation set in, even more violent than the first one in the late 1950s. In January 1987, the currency depreciation could be stopped. The 2nd Bolivian Boliviano became the new currency unit, with six zeros less than its predecessor. The devaluation continued at a much lower rate until the early 1990s. Since then, the currency has remained stable, and in 2011, the Boliviano got re-pegged to the US Dollar.

Bolivia joined the International Monetary Fund (IMF) on 27.12.1945 as a founding member.

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