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SAN SALVADOR, March 15 (Reuters) - El Salvador's government is studying whether to join Ecuador in swapping its own currency and officially adopting the U.S. dollar, the nation's finance minister said on Wednesday.
Finance Minister Jose Luis Trigueros said in a radio interview that El Salvador meets a number of criteria for dollarization, including a stable currency and solid economic fundamentals.
Opposition by business people and others prompted a previous administration to drop the idea of dropping El Salvador's colon currency and adopting the dollar. And the left-wing opposition party, the Farabundo Marti Liberation Front (FMLN), is cool to dollarization.
Official data show El Salvador's economy is already partially dollarized, with some 30 percent of economic operations performed in the U.S. currency. The cash comes in part from the $1.3 billion sent home annually by Salvadorans living abroad.
The impetus behind officially replacing the colon currency would be to ``promote the economic growth and well-being of Salvadorans,'' Trigueros said.
Trigueros said dollarization must be analyzed carefully because of the difficulty of adopting a foreign currency.
``We have to see -- if it comes to that -- what the best method would be,'' Trigueros said. "We're looking at a series of alternatives.
El Salvador's government has remained tight-lipped on the subject of dollarization since President Francisco Flores of the National Republican Alliance (ARENA) party assumed power in June 1999. Flores' predecessor Armando Calderon Sol abandoned dollarization amid opposition from businessmen and other sectors.
Ex-Finance Minister Luis Enrique Hinds, however, maintained until the last moment of the regime it was necessary to dollarize the economy to avoid an eventual devaluation.
Roberto Lorenzana, a deputy for the the left-wing FMLN, said his party may not support dollarization because the International Monetary Fund (IMF) would ``come and dictate monetary policies.''
The FMLN, which transformed itself from a rebel group to a political party after 1992 peace accords ended a 12-year civil war, edged out the ruling ARENA party by winning 31 of 84 national assembly seats in Sunday's elections.
The dollarization of economies in Latin America has been a topic of fierce debate among economists, business leaders and politicians. Many have speculated that El Salvador would be the next country to abandon its currency in favor of the greenback.
If it chose to dollarize, El Salvador would Ecuador, whose Congress voted this month to adopt the currency in hopes it would hasten recovery from a severe economic recession. Argentina began pegging its peso currency to the dollar in 1991.
In Washington, U.S. Senator Connie Mack has proposed legislation that would allow the U.S. Treasury to encourage emerging nations adopt the dollar. And at a recent conference on dollarization, Dallas Federal Reserve Bank President Robert McTeer said dollarization was ``probably a good idea'' for emerging economy nations.
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