How important bills and coins are in daily life in Mexico

There are bills and coins all around us all the time. We can use them to pay for a bus ride, a cup of coffee, or a meal at a restaurant. We also get them as payment for our work. We can save them for an emergency or to buy something in the future.

A few years ago, people thought that banknotes and coins would be used much less, if at all. It was thought that this was because of the rise of other ways to pay, like credit and debit cards. But in Mexico, there are many places where it is better to use bills and coins, like on public transportation, in markets, and on the street.

There are also a lot of ATMs, vending machines, and machines that take bills and coins. Even though there are other ways to pay, most people still use cash. This could be because of tradition or culture, or it could be because of the practical benefits of cash.

How does money work in Mexico?

Money is any good that people are willing to accept and use to buy and sell things and pay off debts. Bills and coins, debit cards, and electronic transfers are all different kinds of money. Money is used for the following:

Payment methods

Money is a way to pay because it can be used to buy things. It lets us turn what we have into money, which we can then use to buy the things and services we need.

Deposit of value

This means that money lets us move the ability to buy and sell goods and services from one time period to another. In other words, money lets people choose whether to buy something now or later. For example, if a baker makes 200 pesos a day, he can keep the money and decide how to spend it tomorrow, next week, or next month.

Unit of measure

This is because money makes it possible to set prices for goods and services and keep track of who owes what. In Mexico, prices are expressed in Mexican pesos. So, for instance, the price of a computer is set in pesos and not in terms of another product (e.g., shirts). The peso is the only asset that can serve as a unit of account. Other assets can't do this.

Money's history

In the past, people traded goods with each other instead of using money. One person traded goods and services that he or she owned for goods that the other person owned that the first person wanted to use. In a small economy, most people who traded did not have many problems when they bartered. But as this economy started to make more goods and services and people started to specialize in different kinds of work, bartering got harder.

For an exchange to work, there had to be two people with the same needs. In other words, in a barter-based economy, two people had to be willing to trade one good for another for a transaction to happen. Trying to find someone to trade with was a waste of time because of these deals. Once two people who were willing to trade were found, they had to agree on how the goods would be traded.

Part of the problems with barter was fixed by using a good that made transactions easier and cheaper. It is called "money merchandise". Before the Spaniards came to Mexico, cocoa, jade beads, and cotton blankets were used as money. Money goods made it possible for people to specialize in different kinds of work. Each person could focus on making very specific goods and services without having to worry about how they would help the people making the other goods.

Years later, money in the form of precious metals like gold, silver, and bronze came into use. This kind of money replaced money made from goods. Metal money had qualities like being able to keep its value, being easy to divide, and being easy to move and store. These features made it easier for the buyer to trade his good (metal money) for other goods (seeds, food, or anything else that could be bought) without having to meet two sets of needs at the same time.

But as time went on, trade grew, and it became harder to carry and store large amounts of metal money. People started using banknotes in the middle of the 19th century. They were backed by the value of gold and silver, so people could trade them for the same amount of gold and silver. This system stayed in place for many years, until the stock market crash of 1929 and the First World War changed the prices of gold around the world. This made many countries, including Mexico, decide to stop using the gold standard. So, fiduciary money got stronger.

The bills and coins we use every day make up fiduciary money. It's called that because it's money that has a certain value (nominal value) but can be sold for less than that (intrinsic value). For example, a 100-peso bill has a face value of 100 pesos, which is what it says on the front, but the paper can be sold for less than that.

The same thing happens with coins. A 5 peso coin is worth 5 pesos, but it can only be sold for less than that because of the value of the metal it is made of. By constitutional decree, fiduciary money becomes money. This means that a government makes it a legal tender, which means that it must be accepted as payment for debts, but it can't be turned into precious metals.

Banknote and coin characteristics

Most things are bought and sold in Mexico with bills and coins. These are good ways to pay for things because:

Durable

That is, they can circulate in good condition for a reasonable time.

Transportable

Because they have the ideal size so that those who use them can move them without difficulty.

Divisible

The different existing denominations allow paying with great accuracy the price of any merchandise.

Homogeneous

Any bill or coin of the same denomination has the same value as the others. For example, all 10 peso coins are worth 10 pesos. No 10 peso coin has a value different from that amount.

Controlled issuance

The Bank of Mexico seeks to maintain the stability of its value and prevent counterfeiting.

Banknote and coin properties

Releasing power granted by law

It is formally established by law that banknotes and coins have the power to be used for the payment of debts or obligations. This power gives certainty to their acceptance. In the case of Mexico, this formal agreement on the operation of banknotes and coins is found in the Monetary Law of the United Mexican States.

Immediate finality

This means that a commercial transaction is completed when goods and services are exchanged for banknotes and coins.

High security

Banknotes and coins have characteristics that allow the public to recognize their authenticity and, at the same time, make counterfeiting difficult.

Low transaction costs

When carrying out commercial transactions, no bank commissions are paid. In contrast, some establishments charge a percentage of the total amount when payment is made with a credit card.

Anonymity

Unlike transactions made with other means of payment such as bank cards or checks, cash transactions are anonymous. There is no trace of them.

Low transaction time

The time required for cash transactions is less than with other means of payment such as checks, bank cards, or Internet transfers.

Banknote and coin design

The design of a new banknote or coin is done by people who know what they are doing. Planning, research, and development are all parts of this process. The creative work is based on a lot of research into facts and images. This research talks about pictures, works of art, the lives and works of famous people, monuments, and places in the world.

This requires looking at documents in historical archives, talking to experts, and visiting libraries, archaeological sites, and museums. The information is analyzed, and the right images and elements are chosen for the future banknote or coin's design, shape, finish, and identity.

At the moment, the main image on Mexican banknotes is a well-known Mexican person or thing. This is paired with pictures of things, places, or symbols that have something to do with his life or work. On the other hand, the current design of Mexican coins includes parts of the Stone of the Sun that is deeply connected to Mexican history, culture, roots, and nationality.

In general, banknotes and coins are a part of how a country shows its cultural identity. They want to show what's important about our history, traditions, and values. In the same way, the quality of the banknotes and coins in circulation can show that a central bank is trusted, stable, and honest.

Banknote and coin manufacturing process

Banknotes and coins are made with the most advanced technology. Care is taken to make sure that their features are reproduced accurately and well enough that they will last. For example, the Bank of Mexico measures and checks the banknotes to make sure they are made of strong materials and have the right size, shape, finish, and other details. As with any other kind of manufacturing, care is taken to make sure that making banknotes and coins is as cheap as possible.

When it comes to banknotes, only central banks or authorized printers can buy the things they need. Before being used to make banknotes, these parts have to pass a long list of physicochemical tests. Banknotes are made with special materials and methods that aren't used in regular printing and can only be made on a large scale by experts. Modern technology is used to make banknotes, which makes it possible to get high-quality banknotes with security features that are reliable and easy to spot.

On the other hand, coins are made from metals that have to meet certain requirements for thickness, width, surface finish, weight, and chemical makeup before they can be used. High quality is made possible by the modern digital design programs, manufacturing equipment, and the vast experience of the people who work at the Mexican Mint.

The tasks of the Bank of Mexico

The history of the Bank of Mexico goes back to 1822 when the Great Bank of the Mexican Empire (Gran Banco del Imperio Mexicano) was planned. Then, in 1917, article 28 of the Mexican Constitution said that only a bank "under the control of the Government" could make money. The Bank of Mexico was finally started in 1925. It was given the only right to make money, both in the form of coins and banknotes. It was also given the job of controlling the flow of money, interest rates, and exchange rates.

According to the constitution, it is the Bank of Mexico's job to make sure that there are enough banknotes and coins for the whole country, in the right denominations, and that they are safe and of good quality. Given how important banknotes and coins are to an economy, it is in the central bank's best interest to keep and build trust in them and make sure the cash supply system works well and meets people's needs.

The Bank of Mexico takes part in the fight against counterfeiting by adding security features that are up-to-date, taking into account how well they work with other features, whether they can be used in industry, how much they cost, and what kinds of fakes have been seen in the country. But it doesn't matter how many or how good the security features on banknotes and coins are if the public doesn't know what they are. To keep yourself safe from counterfeit bills and changes, it is very important to know how to recognize these things.

Source: Banxico