What Is the Dominican Peso (DOP)
DOP is the foreign currency exchange (FX) abbreviation for the Dominican peso, the Dominican Republic's official currency. The Central Bank of the Dominican Republic issues and manages the money, which the symbol, $, or RD$ represents locally.
One Dominican peso is composed of 100 centavos and comes in banknotes of 50, 100, 200, 500, 1000 and 2000; and coins worth 1, 5, 10 and 25 pesos. As of August 2020, 1 DOP is worth approximately US $0.02.
- The Dominican peso (DOP) is the official currency of the Dominical Republic.
- The currency first appeared following its independence from Haiti in 1821, where the peso oro was initially backed by gold.
- Since 1963, DOP is now a free floating fiat currency not backed by any valuable commodity.
A History of the Dominican Economy
The Dominican Peso was first issued for circulation in 1844 after the Dominican Republic gained independence from its neighbor, Haiti. The two nations share the Caribbean island of Hispaniola. Hispaniola is believed to be the location where Christopher Columbus landed during his 1492 voyage. The island would become the seat of Spanish rule in the New World.
In 1821, the Dominican people declared their independence from Spain. However, instead of independence, the population was forcibly annexed by Haiti. Twenty-two years later, the nation fought and won their independence. Frequent changes to government structure and problems with the economy plagued the young nation. Haiti continued to threaten the country with annexation.
By 1861, the government agreed to become a Spanish colony once again, but this lasted for only four years before declaring independence anew. During this second independence, political instability and despot rule caused the country's foreign debt to grow. During the 6-year period from 1899 and 1905 there were five different presidents of the Dominican Republic and four separate revolutions. The Dominican government during this period was routinely strapped for cash and was having trouble paying its obligations to countries like France, the Netherlands, Italy, and Germany.
The deteriorating political situation on the island amid inflation and a steep decline in the price of the Dominican Republic’s chief export, sugar forced the country to bankruptcy by 1902. Dominica's creditors sent warships to the Dominican Republic’s capital of Santo Domingo, to assure repayment. However, in January 1905, President Roosevelt hoping to limit European intervention in the Americas, established a protectorate over the island nation. The U.S. took control of customs and substituted the U.S. dollar (USD) for the Dominican Peso (DOP) and began to help the nation pay off its international debt. The U.S. relinquished rule in 1922, and a new Dominican government was elected.
Again, years of dictator-like governments led the nation, but the economy grew as did transportation and education. In 1963, the island nation had a democratically elected leftist government. The U.S. supported rebels during a civil war to oppose pro-communist factions, and a series of governments followed all plagued with party bias and corruption. However, the economy of the nation continued to grow with inflation controlled.
According to World Bank data, the Dominican Republic experienced a 1.8% annual inflation rate and had a gross domestic product (GDP) growth of a 5.8%, as of 2019, which is the most current year of available data.
Understanding the Dominican Peso
After independence, the peso replaced the Haitian gourde at par. In 1877 the currency converted to the decimal system and was subdivided into 100 centavos. Between 1891 to 1897, the country released a second currency, the franco, which circulated as an additional parallel currency. Initially, paper money was produced and distributed by two private banks.
In the early 1900s, the U.S. briefly took control of the Dominican Republic. As a result of the island becoming a U.S. protectorate, the U.S. dollar officially replaced the Dominican peso in 1905. The exchange was pegged at a rate of 5 Dominican pesos to one U.S. dollar. The Dominican Republic began circulating its own currency again in 1937, but only in coin form, called the peso oro. The U.S. dollar remained in wide circulation through WWII.
Eventually, the Dominican government established the Central de la República Dominicana as the central bank for the nation. The central bank is located in Santo Domingo and is responsible for maintaining price stability and protecting the integrity of the Dominican economy and payments system. The bank also manages the country’s foreign exchange reserves, to ensure that Dominican businesses have adequate access to foreign currencies.
During economic troubles during the early 1960s, the government recalled some of the coins in circulation, which were melted down. Later, in 1963, the Peso Oro became a fiat currency where its value derived from the relationship between supply and demand, not an underlying commodity. Renaming of the peso oro happened in 2011 returning the name of the currency to simply the peso.