Colombia's Monetary System: From Gold to the Dollar.  

The first thing I realized when I was trying to find out how does the money emission system in Colombia works is that the information is really hidden in the web. Not even the web site of the Banco de la República gives the entire information of how the system of monetary creation in Colombia works. According to this site, Colombia's monetary system has fluctuated along the eras. The system has changed according to the needs of the country. During the first years after the Colombian independence, Colombia managed to create an equivalence to the Spanish coin, and therefore it depended on the exchange value that the Spanish coin had at a determined time. The system continued for some more decades, changing the reference coin every time. The Colombian peso also used as reference the French franc and the British pound. Later, the peso used as reference the amount of gold that the Banco de la República had, in order to decrease the probability of inflation. This new coin was called the Peso de Oro (Golden Peso).

This system worked perfectly during the first decades of its usage. However, this system was not useful when it came to global economics. As the planet's economy changed depending on the international supply/demand system, Colombia was getting behind in this ambit. During that time the country  needed to protect the value of its major product: Coffee. Therefore, during the presidency of Pedro Nel Opina (1922-1926), the government hired some economic specialists to advice the country about what monetary system the country should adopt. The Kemmerer mission recommended the abandonment of the gold exchange system and the adoption of the dollar-peso exchange system. Colombia officially abandoned the gold exchange system in 1931 as the result of the proclamation of the 1638 decree. The most important recommendation of the Kemmerer mission was the creation of an organism that could managed the monetary mechanics in the country. The Banco de la República was officially created in 1923.

But the central bank of Colombia changed its policies according to the ages and the different monetary movements of the world. By adopting the dollar exchange rate, Colombia officially became a dependence of the economic dynamics of the U.S. In this way, Colombia only creates money when the economic growth of the country allows it. Partially, it slows the devaluation of the peso, but does not stops it. In this way, Colombia's central bank differs from the Federal Reserve of the U.S, because the creation of money is directly proportional to the economic growth of the country, rather than the reserve of it. However, Colombia's growth depends on the value of the dollar, therefore, they share some traits including the devaluation and the decrease of the acquisitive value. Colombia, therefore, is part of a system designed to fail. 

Image taken from the web site dinero.com

n.a. "Emisión de Dinero." Biblioteca Virtual Luis Ángel Arango. n.p. (2011). Web. <http://www.banrepcultural.org/blaavirtual/ayudadetareas/economia/econo83.htm> April 3, 2014. 

n.a. "Politica Monetaria." Banco de la República: Banco Central de Colombia. n.p. (2013). Web. <http://www.banrep.gov.co/es/politica-monetaria> April 3, 2014.