On the night of September 30, 1941, the President of the Republic, Dr. Arnulfo Arias Madrid, addressed the nation by radio and announced that, beginning on October 1, 1941, Panama would have its own paper currency.
The Constitution of 1904 stipulated that currency of Panama would be known as the Balboa and coins up to B/ 1.00 would be minted, but no paper currency would be printed. Instead, the U.S. dollar would circulate throughout the country.
While in 1911, under the presidency of Pablo Arosemena, a law had been passed authorizing the use of paper money, this was never carried out. Again, under President Porras, the same course had been proposed, it also failed to materialize. Finally, in 1933, the Comptroller of the Republic, Martin Sosa, made a very detailed financial study which indicated that there would be many advantages if Panama would issue its own paper currency, but the General Assembly turned down the proposal.
But in 1941, a new board of directors of the National
Bank decided to go ahead with the project to issue paper Balboas as the
official currency of Panama. It was decided to issue B/ 6 million. Each paper
Balboa would be backed by an equivalent reserve in Panamanian silver coins or
by 0.987-1/2 milligrams of gold, guaranteed in the vaults of the National Bank.
The National Treasury took care of the initial expenses and the firm of
Hamilton Bank Note Company printed the first batch of bills, Series 1941,
consisting of the following:
720,000 bills of B/1.00
100,000 bills of B/5.00
100,000 bills of B/10.00
25,000 bills of B/20.00
for a grand total of B/2,720,000.00. On October 2, 1941, the first bills went into circulation and President Arias was the first person to present himself at the offices of the National bank to exchange dollars for Balboas.
The new bills were the same identical size as the US Dollars. The bust of Balboa appeared on the front of the B/1.00 note and its general color was green. On the B/5.00 bill appeared the statue of the Indian Chief Urraca and the general color tone was blue. For the B/10.00 bill, the color was red and the tower of Old Panama appeared on the front. The illustration chosen for the B/20.00 was a wagon pulled by two oxen with its driver (no mention is made of the color). On the middle of the reverse side was the National shield with the slogan HONOR, JUSTICE, LIBERTY having replace the traditional PRO MUNDI BENEFICIO.
The new currency was accepted slowly by the general public while the Governor of the Canal Zone, on October 8, issued a declaration that the "Paper currency of the Republic of panama must be accepted throughout the Canal Zone." The next day, October 9, President Arias was overthrown when he left the country incognito to visit Cuba. By Panama law, the President could not leave the country without the approval of the General Assembly (this may have changed now). Naturally, at that moment, the support for the new money collapsed. On December 30, 1941, the paper currency was officially liquidated with the public given ten years in which to exchange the Balboas for the same value in dollars. Almost all the paper bills were burned in the ovens of the Mechanical Division of the Panama Canal with a few in denomination of B/1.00 were burned in the ovens of La Escuela de Artes y Oficios, giving my Father the opportunity to get one bill which is now in the care of my son Glenn. It is indeed a shame that no forethought was given to save more of these bills for their historic value.
In the end, the paper currency of Panama had a short life of just 7 days. In all the catalogs of collectors, these bills are considered extremely rare although not very financially valuable. Those who still may have some, keep them more for the sentimental value.
- Luis R. Celerier