What Is the Peruvian Sol (PEN)?
The Peruvian sol (PEN) is the national currency of Peru. It began circulation in January 1991 under the name Nuevo Sol. Under a law that went into effect on Dec. 15, 2015, the name of the monetary unit was renamed to Sol.
- The Peruvian sol is Peru's national currency.
- Other currencies Peru has used throughout its history are the escudo, peso, real, inti and Nuevo Sol.
- Peru's economic performance has improved in the past few decades, with the country recently generating modest economic growth and mild inflation.
Understanding the PEN
As a Spanish colony, Peru used the escudo, peso and real as its currency. Despite winning independence in 1821, it used the escudo until 1863, when its monetary system was decimalized and the sol was introduced. Massive inflation forced Peru to overhaul its currency in 1985, when it introduced the inti to replace the sol at a 1,000-to-1 ratio. Severe economic distress and bouts of hyperinflation required the government to scrap its currency again in 1991. The government introduced the Nuevo Sol, which was equal to one million inti.
On Dec. 15, 2015, the name of the national currency was changed from Nuevo Sol to simply Sol.
Peru's political history illustrates the challenges of maintaining a stable currency. During the 1960s, democratically elected Fernando Belaúnde Terry undertook a system of economic liberalization, with an emphasis on exports. His efforts were stymied by the persistent threat of Cuba-inspired political uprisings. In 1968, General Juan Francisco Velasco Alvarado seized power and nationalized the fishmeal industry, along with several oil companies, banks, and mining firms.
In 1980, Peru returned to civilian rule in accordance with a new constitution. Belaúnde Terry regained the presidency on a platform of reversing the previous decade's financial mismanagement. However, his popularity quickly eroded due to high inflation, economic hardship, terrorism.
Thankfully, Peru’s economy has fared better in the 21st century. The country has one of the best track records in recent years on poverty reduction, and growth in foreign direct investment has increased demand for the Peruvian sol.
Real World Example of the PEN
The Central Reserve Bank of Peru issues the Peruvian sol in banknote denominations of 10, 20, 50, 100 and 200 soles. The currency is represented with the symbol S/. The Peruvian sol is subdivided into 100 céntimos. Coins circulate in denominations of S/5, S/2 and S/1 and 10, 20 and 50 céntimos.
Peru's top trading partners are China, the United States, India, South Korea and Japan. Its largest exports were copper, gold, oil and zinc. According to World Bank data, Peru registered 2.15% GDP growth in 2019, with inflation of 2.13%.
As of March 2021, one U.S. dollar bought approximately 3.68 PEN.