What is the PYG (Paraguay Guarani)
PYG (Paraguay Guarani) is the national currency of Republic of Paraguay. First circulated in 1944 the currency has suffered severe inflation over its lifetime. The name of the money comes from Guarani, the primary American Indian language and ethnic group in Paraguay. When written, the symbol is ₲.
BREAKING DOWN PYG (Paraguay Guarani)
In 1943, the Paraguayan government authorized the replacement of the peso with the Paraguay Guarani (PYG). The new currency exchanged at a rate of one guaraní to every 100 pesos. This exchange rate was intended to curb inflation then plaguing the republic.
As the PYG suffered from the same problems as its predecessor, the government changed its pegging to the United States dollar (USD) in 1960 and would last until 1985. The new exchange rate was one dollar to every 126 guaraníes. However, the value of the currency continued to erode. Thanks to rapid devaluation, the Republic of Paraguay introduced larger denominations of bills and coins. The first 50,000 guaraníes notes were issued in 1990, followed by 100,000 guaraníes in 1998.
Since 1985, the value of the guaraní has declined sharply. As an example, the USD/PYG exchanged at 3972.000 in 2008, and by 2018 that rate was 5697.113.
The country suffered from double-digit inflation in the early 2000s but has begun to get this problem in check. This high inflation is partially a result of Paraguay's foreign debt, which reached over USD 16 billion as of 2016. Also contributing to the problem is a problem with liquidity surfacing in 1995. In 1995, several of the country's essential banks were shut down following the revelation of rampant corruption within the financial institutions.
The Republic of Paraguay is a landlocked country in South America which has suffered through a series of dictators until 1989. In 1993, the country would see its first multi-party elections. Paraguay declared independence from Spain in 1811 which received recognization in 1842. The primary export is soybeans, and the republic is the 6th largest producer in the world. According to 2017 World Bank data, Paraguay experiences a yearly gross domestic product (GDP) growth of 0.8% with an inflation deflator of 5.5% annually.
Problems with Security and Replacement of the Paraguay Guarani
During the 1980s and 90s, multiple printing companies produced guaraní banknotes. Starting in 2004, the existing denominations, except the 50,000 guaraníes, were redesigned and included enhanced security features.
An illustration of the need for more secure banknotes came with the 2004 issue of the updated 50,000 guaraníes bills. Printed with the date of 2005 these notes illegally circulated before being officially launched. As a result, the central bank, the Banco Central del Paraguay, declared the bills void and worthless. In 2012, the central bank demonetized the series A and B 50,000 guaraníes and the 1000 guaraníes notes, removing their status as legal tender. Paraguay continues to improve the security of the currency. On December 22, 2016, new 20,000, 50,000 and 100,000 notes were introduced with upgraded security.
In 2011, the Paraguayan government unveiled plans for the nuevo guaraní using the symbol N₲. This currency would have an exchange rate value of 1 nuevo guaraní per 1,000 guaraníes and would not have high denomination notes. After a planned two-year transition period the new money would be the only accepted currency. Also proposed was to reuse the already circulating guaraní banknotes with three of the zeros crossed out manually. As can be imagined, this plan was scrapped due to its complex nature, the potential for confusion, and fears of making the already dire economic situation worse.