User-created currencies in Latin America

Camilo Ramada, Aktie Strohalm, Utrecht, The Netherlands, May 2000


It's easy to criticise money. Medieval thinkers stated that, because it was an abstract representation of all value, it was too close to God. Others saw its addictive features as an act of the Devil. Money can be criticised within its own parameters, too, since it does not always fulfil its main functions - the facilitation of trade, the provision of a unit of value, and its role as a store of wealth - particularly well. This means that better monies must be designed.

In moments of crisis, or in situations of poverty (which can be defined as a continued local crisis), money is often one of the first tools to fail. It simply disappears. Indeed, it is sometimes money itself that causes the crisis, as can be seen in the recent collapses in Mexico and Asia.

The production of food, goods and services and the provision of health care and education all suffer when money disappears. As soon as we don¹t have the abstract symbol of value it provides we don¹t any longer know how to organise ourselves, how to specialise, how to keep track of who owes what to whom. That is why in moments of crisis or situations of poverty, people have often been forced to re-invent money.

Alternative currencies and trading systems are thus by no means new concepts. Community currencies stretch back to the early days of human civilisation. Today, community economic development (CED) practitioners see them as providing alternative employment strategies and "community mutual aid" amongst marginalised and unemployed individuals and households. They can give them a new strategy for activating the local economy.

However, the Local Exchange and Trading System (LETS) and other types of community currencies which exist in the more technologically advanced economies of North America and Europe have not, until very recently, been used by localities in the underdeveloped/overexploited southern countries as part of their response to the pressures of the capitalist world-system.

Other types of local money have been used there instead and have often proved very successful. They include revolving loan circles, reciprocal gift exchanges, the microcredit movement, and other mechanisms of mutual aid. However, the way in which the global economy is influencing the monetary systems in developing countries continuous changes. This means that even more innovations are required. At the same time innovations are feasible: technology in general and knowledge of money in particular are rapidly developing and provide many angles from which to advance.

This paper deals with the types of innovative types of unofficial money currently in use in Latin America where user-created currencies are to be found in almost all countries of the continent. Some are more successful than others and they have many different features. My examples will be drawn from Argentina and Mexico but similar systems can be found elsewhere.

Argentina: quick and unprecedented success.

The most successful social currency in the world today is the crédito of the Red Global del Trueque (RGT) multi-reciproco (global network of multi-reciprocal barter), a network which facilitates trade between some 200.000 Œprosumers¹ (producers and consumers), organised in more than 500 Œnodes¹. About a million créditos circulate, with each the nominal value of 1 Argentinean peso, which is in turn equal to 1 U.S. dollar. Let uw view shortly the history of how they came about.

Some years ago, the members of the Programma de Autosuficiencia Regional (PAR), found that many of their social projects and initiatives failed due to a lack of means and resources. For example, their day-care projects could not pay for food and personnel, their capacity-building initiatives could not pay for materials and housing.. With this in mind, the idea rose to turn things around, and to start by fulfilling economic needs. In May 1995, in a neighbourhood of the municipality of Bernal (Buenos Aires) a weekly barter-meeting was organised where neighbours could exchange household commodities and small services.

This proved very successful in many ways. First of all, needs were fulfilled. Small household production such as bakery, crafts such as plumbing or carpentry, and services such as advice or therapy, suddenly became affordable for all the participants. At the same time, by being able to fulfil their needs and to be productive, individuals (re)gained a sense of self esteem and fulfilment.

Dynamics and Growth

Within a short period, surrounding neighbourhoods copied the system and after some media-coverage, exchange-clubs flourished all over in the province of Buenos Aires, as well as in the rest of the country. In less than three years some 100.000 people had become active in one or more ´clubs del trueque´.

What had started as a small, and informal exchange-club had acquired an unprecedented and unforeseen dynamic. This changed the way the exchanges were made and instead of keeping written accounts to keep track of exchanges and to safeguard reciprocity, some exchange-clubs chose to print small tokens denominated in credits, with one credit equalling one Argentinean peso. Then, as neighbourhoods started to trade with other ones throughout their region the Trueque came to be seen as a network with nodes. Hence the words 'Red Global' (global network) in the name..

Structure and control

The RGT can be best described as by having a chaordic (truss-like) structure. There are somewhere between 400 and 600 ´nodes´. Some nodes interact with others, some don´t. Some nodes issue credits, some don´t . Issued credits are normally distributed equally among all members, and the most frequently used amount of credits to be issued is 50 per participant. But there is no central organ, no central administration, and certainly no legislation. The participants in one Œclub¹ decide for themselves whether or not to accept credits issued by other clubs.

In the past three years, however, the network has begun to acquire a structure. In Buenos Aires province, for example, some clubs have joined a structure dividing the province in four ´zones´. These clubs have exchanged their ´club-credits´ for ´zone-credits´, thereby simplifying and securing some aspects of interaction. But certainly not all clubs have entered this scheme, and in the countryside the fragmentation is still very large.

Although this chaordic structure has enabled rapid growth, the lack of central control and administration has left the system open to fraud.

Present situation

Today the Red Global del Trueque must be called a success. In only five years it has become a large network of social and economic interaction involving at least 200.000 people. Some families depend on its créditos for more than 90% of their income. Many economic needs have been fulfilled that were being ignored by the formal economy. Crafts have been revived that had been labelled ´obsolete´. Local social and economic structures have been re-established More than 1.000.000 créditos are circulating. and, most important of all, individuals have gained esteem and fulfilment.

This has all been achieved without any external funding, by committed people working on a volunteer basis, and with the co-ordination and strategy coming from the system itself. In other words, apart from supplying crafts, goods or services to others within the Trueque economy, the participants have had to resolve all the problems that have arisen about the way RGT should operate. And, on top of this, many people have had to perform their 'day-jobs' in the formal economy..

Tianguis Tlaloc: good and solid structure, modest economic results.

Another system with quite a different background is the Tianguis Tlaloc. This was set up in the state of Oaxaca in 1994 and in Mexico City in 1996 by the Promocion del Desarrollo Popular A.C. (PdP), a 30 year old non-governmental organisation.

The name 'Tianguis Tlaloc' is derived from the Aztec words 'tianguis', meaning "open-air market" and 'tlaloc', the name of one of the Aztec deities related to water, rain, thunder and life. It also happens to be the name of the street in the low-income neighbourhood where the PdP's office is located.

The Tianguis Tlaloc uses a printed currency as a medium of exchange, featuring scenes of Aztec life, suggestive of the rich cultural history that Mexicans share. The currency is issued like LETS, and is of the mutual credit type as described below.

Over its long history, the PdP has initiated many grassroot initiatives to address poverty and development concerns, providing advice, logistical support and information. In 1989, the PdP launched ŒLa Otra Bolsa de Valores¹ (The Other Stock Exchange) as a project and a journal. According to the PdP's executive-director and architect Luis Lopezllera Mendez, there was necessity for "a systemic approach to networking NGOs and relevant grassroots groups in order to share knowledge and opportunities related to self-reliance strategies. The Tianguis Tlaloc is a product of this process"

The idea to implement a parallel currency arose in July of 1993 when Mark Kinney, an American anthropologist and historian, visited the PdP's office and suggested it. His article on local currencies was published in the Otra Bolsa de Valores journal.

The next year, in 1994, an attempt was made to launch the 'Boja' currency in the Mezquital Valley in the state of Oaxaca. However, the rebellion by the Zapatista National Liberation Army in the neighbouring state of Chiapas raised federal government concerns that the parallel currency was being used to extend the range of Zapatista control, and thus it was terminated some months later.

The Tianguis Tlaloc was introduced in 1996 through La Otra Bolsa de Valores by trying to recruit the magazine's subscribers. Luis Lopezllera says that they "realised that many of them belong to organisations in the middle level, linked with the development co-operation issue and dealing with subsidies, foreign aid, "development" projects....but few are skilful or personally involved in productive and common services. Many were interested in the theoretical approach of 'alternative currencies' ‹as professionals already with a job­but very few were in personal need for expanding a mutual aid system for themselves. So, without disregarding them, we started putting the accent on individuals, families and grassroots movements, less ideological but linked by geography, trade or social need/aims. 1998 was an important year for this strategy."

The Tianguis Tlaloc was introduced to the public through neighbourhood markets that were set up by the PdP, featuring home-made goods and hands-on services. It did not take long for the numbers of people using the Tlaloc to grow to a few hundred.

How it works

The Tlaloc Community Currency System is a combination between the HOURS system and the LETS System, taking the advantages of both while removing the negative aspects of both. In other words: the Tlaloc system is both a scrip-system and a mutual credit-system. To understand these components, some explanation might be necessary.

Scrip-systems are monetary systems that use notes to facilitate trade. The term comes from the nineteen thirties, when many localities in the U.S. issued their own notes to overcome difficulties during the Great Depression. These notes they called scrip. [Note: see Irving Fisher, Stamp Scrip, Adelphi, New York, 1933] Today in the U.S. the HOURS-system still uses this idea as a way to facilitate social services.

Mutual credit-systems keep records of all transactions in an accounting structure. If A sells something to B with value X, A¹s account is credited X and B¹s account is debited X. A¹s account is now +X and B¹s account is -X. When all accounts start at zero (0) then all debits summed up with all credits will always give zero. The credits within the community are given by the community itself. I give credit to you, you give credit to him/her, and he/she gives credit to me. Hence the term mutual credit.

In the Tlaloc community, both printed bills and an accounting structure are the methods of facilitating and recording transactions between the users of the system. Bills are denominated according to time, with a corresponding monetary value of 25 pesos or 3 dollars US per hour. When a member joins the system, he or she receives 15 hours in Tlaloc notes, and a 40 hour credit to their account. When they spend the Tlaloc, their account will be recorded as a debit.

The currency is issued into circulation when it is endorsed by the two parties to a transaction who sign the front of the bill. Subsequent recipients of the bill sign their name on the back. Cheques must be signed by both parties three times, with one piece going to each of the parties and third piece going to the administration. A catalogue of Offers and Requests is printed for the members, identical to those offered by both LETS and HOURS systems, and published every 4 months.

Thus the Tlaloc System has the advantage being easy to use because of the printed notes and the sound method of issuing money produced by the accounting system.. The notes also allow transactions to take place between people who may not be members, unlike the LETS system where transactions can only take place between members, while allowing the members to issue their own money, unlike the HOURS system where the currency is issued to the member upon them listing their offers or requests in the Noticeboard.

Merits of Tlaloc compared with Trueque

In comparison with the Trueque-system in Argentina the economic success of the Tlaloc initiative is very modest. Some hundred participants who do very limited trading is a small fraction of the millions of transactions in Argentina. The main reason for this seems to lie in the origins of both systems. While the Argentinean system arose from practical necessity, the Tlaloc is more a creation of the mind. Both approaches have their strong and weak points.

While the Tlaloc system has not achieved as much as the Trueque in an economic sense, it has reached to very important goals: on the first hand the PdP has produced a lot of material on the subject of monetary reform and community currencies. Their Spanish publications are the main material in Latin America on the subject. Luis Lopezllera and his organisation have attracted a lot of attention both from within the continent as well as from abroad. The Tlaloc has undoubtedly played a major role as a catalyst of community currencies in Latin America, but also elsewhere. As a matter of fact, the newly started Bia Kud Chum local currency in Thailand has had a lot of support from Mexico.

The Trueque system however has developed out of immediate practical necessity. The system has always been conceptualised as it was being implemented, and there has always been little time for planning and almost no time at all for reflection. The dynamics of the system are so strong that steering is the most that can be done. This is not to say that there is no room for vision. On the contrary: vision has been the main tool in the management of the system. But there is no place to implement concepts: there are only developed realities.

The biggest evidence of these differences is in the main tool they use: the means of exchange. Tlalocs are very well designed, both materially (they look very good) and conceptually: the mixture of a mutual credit-system with a printed currency is widely seen as potentially the most powerful way of re-designing money. Créditos on the other hand are the opposite: they have no real conceptual design at all, they just came into existence when people started to create them. Nobody knows how many there are, nobody controls them and nobody actually backs them. Potentially this is a very dangerous situation.

But, on he other hand, the créditos go from hand to hand, facilitating a lot of trade, satisfying a lot of needs, and realising a lot of value, while the tlalocs are mostly found at the homes of well-meaning people who support the idea but do not actually trade.

Inspiration and challenges for the future.

The Latin American reality of today shows us many initiatives in the field of user-created currencies. In almost every capital, from Montevideo to Medellin, from Lima to Rio de Janeiro, and, indeed, from Mexico City to Buenos Aires there are functioning systems of reciprocal trade. These currencies are loosely connected in informal networks, but there is certainly no institutionalised or systematic exchange of experiences, knowledge and proposals. Within this loose network the main figures in both the Trueque and the Tlaloc systems are seen as the innovators and both organisations try to visit, invite, help and advice the others as much as possible.

All the systems could gain a lot by having some resources. In Argentina for example it would be good to find the space to reconceptualise the crédito, and have the money to develop an optimal currency. This would be essential to have the crédito successfully reach a level above household-production and have it facilitate larger-scale production and investments. In other cases, in Paraguay or Mexico, where the implementation depends on NGOs (which can be seen as Œexternal¹) a popular campaign of information can have quick results in the sense of understanding and acceptance of the idea.

In all cases some professional structuring and a little resources, together with a commitment on the level of research and development could provide quick and large results. The levels of achievement in the last five years, without any funding and with hardly any knowledge, attest to the great potential there.