You’re landing at Tocumen International, ready to grab a taxi or a quick coffee, and you realize you forgot to check the exchange rate. Panic usually sets in at this point for most travelers. But here’s the thing about Panama: if you have a pocket full of greenbacks, you’re already holding the local "paper" money.
Panama is a bit of an anomaly in the financial world. Technically, the country’s official currency is the balboa (PAB). But in practice? It’s the US dollar. Since 1904, the US dollar has been legal tender here, and it’s honestly one of the smoothest travel experiences you’ll ever have. No math. No booths. Just spend.
Understanding us dollars to panama currency and the 1:1 Peg
Let’s get the technical stuff out of the way. The Panamanian balboa is pegged to the US dollar at a strict 1:1 ratio. Always. If a soda costs 1.50 balboas, it costs $1.50 USD.
The fascinating part is that Panama doesn't even print its own paper money. Every single banknote you see—from the crisp $20 bill from an ATM to the crumpled $1 bill at a fruit stand—is a United States Federal Reserve note.
So, when you look at us dollars to panama currency, the exchange rate is non-existent because they are essentially the same entity for paper transactions. The only time things look "different" is when you get change back.
The Coin Situation: Balboas vs. Cents
While the paper is American, the coins are a mix. Panama mints its own coins, which they call centésimos. They are designed to be identical in size, weight, and metallic composition to US coins.
- A Panamanian 25-cent coin looks and feels just like a US quarter.
- The 50-cent coin is common in Panama, unlike in the States where it’s a rarity.
- You’ll often see a $1 coin, known locally as a "Martinelli" (named after the president who introduced the latest version).
You can spend a US nickel and a Panamanian 5-centésimo coin in the same transaction without anyone blinking an eye. They live in the same cash registers and the same pockets. It’s a total blend.
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Why Panama Decided to Use the Dollar
It’s not just a coincidence. This dates back to the very birth of the Republic. In 1903, Panama split from Colombia, and the US was right there to help with the construction of the Canal.
By 1904, the two nations signed a monetary agreement. The US dollar brought instant stability. While neighboring countries in Central and South America have historically struggled with hyperinflation and "deleting zeros" from their currency every few decades, Panama hasn't.
Honestly, it's a huge reason why the country is a global banking hub today. Investors love predictability. Knowing that a contract signed today in dollars will still be worth the same "value" in ten years is a massive economic stabilizer.
The "Ghost" Central Bank
Another quirk? Panama doesn’t have a traditional Central Bank that prints money or sets interest rates. Because they use the US dollar, they essentially "outsource" their monetary policy to the Federal Reserve in Washington D.C.
If the Fed raises rates, Panama feels it. If the dollar strengthens globally, Panamanian exports become more expensive. It’s a trade-off: they lose some control over their own economy, but they gain a currency that the whole world trusts.
Real-World Tips for Handling Cash in Panama
Even though it’s all dollars, there are some "unwritten rules" you should know before you start tossing hundreds around in a small village.
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1. The $50 and $100 Bill Problem
Panamanians are incredibly wary of large bills. Counterfeiting is a real fear. If you try to pay for a $12 lunch with a $50 bill, don’t be surprised if the manager is called over. They might ask for your passport number or even record the bill's serial number in a logbook. Stick to $20s, $10s, and $5s.
2. ATMs Dispense Dollars
When you put your card into an ATM (locally called a cajero), it will give you US dollars. Usually, there is a flat fee—often around $5.25 per transaction for foreign cards—so it’s better to take out a larger amount at once rather than making frequent small withdrawals.
3. The "Martinellis" are Local
Those $1 Panamanian coins are great in-country, but they are worthless the second you step on a plane. US banks won't take them. If you’re heading back to the States, try to spend your Panamanian coins first and keep your US paper bills for the trip home.
4. Pricing Labels
On a menu, you might see "B/. 10.00" or "$10.00." They mean the exact same thing. Don't let the "B/." symbol confuse you; it's just the formal way of saying Balboa.
What Most People Get Wrong About the Exchange
I’ve seen travelers at the airport looking for a "USD to PAB" exchange booth.
Don't do it.
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If a booth offers to exchange your US dollars for Balboas, they are basically charging you a fee to give you different-looking coins for your paper money. There is literally no reason to "exchange" money if you already have US currency.
If you're coming from Europe, Canada, or anywhere else, just exchange your local currency directly for US dollars. You’ll find that much easier than trying to find someone who specifically stocks Panamanian coins (which they won't).
Is it expensive?
Because it's dollarized, Panama isn't the "dirt cheap" destination some expect compared to, say, Nicaragua or parts of Colombia. However, because there is no currency volatility, prices for things like real estate and high-end electronics stay relatively consistent.
A beer in a local "fonda" might be $1.50, while a craft cocktail in Casco Viejo could easily be $12.00. It's a range, but at least you know exactly what you're spending without needing a calculator app.
Actionable Next Steps
If you're planning a trip or a move to Panama, keep these steps in mind to handle your money like a local:
- Notify your bank: Tell them you're going to Panama so they don't freeze your card when they see a "foreign" transaction, even though it's in dollars.
- Carry small bills: Go to your bank before you leave and ask specifically for a stack of $1, $5, and $10 bills. Avoid $50s and $100s like the plague.
- Download a banking app: Since you'll be using ATMs, keep an eye on those withdrawal fees. Some US banks (like Charles Schwab) actually refund those $5.25 ATM fees at the end of the month.
- Check your change: Before you leave the country, dump your Panamanian coins at a local grocery store or tip your last taxi driver with them. Once you leave Panama, they are just shiny souvenirs.