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Fecha:Domingo, 20 de Octubre, 2002  01:47:25 (-0500)
Autor:Ricardo Ocampo <redluz>




Background paper prepared by Luis Lopezllera and TCC (Jeff Powell and Menno
Salverda) for the conference on Economic Sovereignity, Bangkok, March
23-March 26, 1999.

Luis Lopezllera is director of Promocion del Desarrollo Popular (PDP) and
intiator of the community currency system TLALOC in Mexico. Luis is in
Thailand on invitation of Focus on the Global South and the TCCS (Thai
Community Currency Systems) Project, funded by the JFAC, CUSO and VSO. The
TCCS project exchanges information regarding alternative economic systems
within Thailand and abroad with the aim to establish community currency
systems in Thailand.

What are community currencies?

Community currencies are interest-free exchange mediums that can only be
used in the community in which they originate. The community currency
economy exists in parallel with the mainstream economy; some trading is done
in national currency, some in community currency, and some in a combination
of the two. Community currency systems are based on either the LETS concept
(Local Exchange and Trading Systems), popular en Canada, Europe and
Australia or the HOURS model first established in Ithaca, New York.

It is estimated there are over 2000 LETS-type community currency systems,
where total number of members vary from 50 in Guelph, Canada to more than
700 in the Talents system in Switzerland and over 2000 in the Blue Mountain
LETS in Australia. Trade in these systems still happens mainly in the
services sector, although many now also have small businesses participating.
Currently about 50 ŒHOURS¹-type systems operate in North America. In Ithaca
New York, a monthly trade volume is estimated at 6,000 HOURS (60,000 US$)
between 1,500-2,000 people (Powell and Salverda, 1998).

HOURS-based community currencies employ a piece of paper (Œnotes¹ or
Œcoupons¹) as the medium of exchange, while LETS systems use credits and
debits in an account ledger (with no physical representation). The value of
these currencies is determined by members of the community. Variously, the
value has been tied to the national currency; equated to an hour of labor;
or allowed to determine itself through members¹ exchanges. Community
currency systems are backed by the resources within a community, including
the labor of its members, and the trust the members have in each other.
Community currencies fulfill the two most essential functions of money
(Lietaer, 1998). They provide:

-a standard of measure, to compare the value of goods and services, and

-a medium of exchange, to facilitate the exchange of goods and services
along with the national currency.

Note that, in the case of national currency, this function conflicts with
the desire to have money serve as a store of value. Money stored or hoarded,
whether to earn interest or simply to safeguard it, is not available to
exchange goods and services. This deprives others of economic activity,
leading in the worst case scenario to a recession.

Hoarding of money is stimulated through its commodity price--the interest
rate. Because of the presence of interest rates, money in the bank today is
worth than any day in the future. Or, to put it in economic terms, the
discounted present value of future income is negligible. Here is the link
between positive interest rates and environmental degradation; cutting a
tree today and depositing the earnings from its sale in a bank is more
profitable than withdrawing money from the bank to plant trees in the hopes
of earning income somewhere down the road.

Because community currencies bear no interest (money is de-commoditised)
hoarding is discouraged. Instead of storing the money in order to earn
interest, there is an incentive to invest it in activities which yield
income over the long run (suddenly it would make economic sense to plant
trees). To spur this incentive, some community currencies advocates have
proposed a Œcharge¹ on the use of money. This is known as Œdemurrage¹. If
money were to devalue over time, there would be an incentive to spend the
money as quickly as possible, thereby increasing the speed at which the
money circulates between members of the community (the Œvelocity¹ of money).
(Gesell, S., 1929).

In 1972 the gold standard was abandoned. Since that time, money has been
created as a mere fiat currency (not backed by anything material). This is
propelled through the Fractional Reserve Banking mechanism. Through this
mechanism, commercial banks have to keep only a certain percentage of the
outstanding deposits as reserves. With a fractional reserve requirement of
10 percent, commercial banks can continously re-issue10 dollars for every
dollar coming in as a deposit, as loans to customers. So, most of the money
we see in our pockets, or in our bankbooks, exists as debt. It is not
covered by gold or any other resource or value base. Its value is merely
dependent on the trust people put in it. Nobody knows why people still do.
These debts have to be serviced at some point -- by the real sector! This
requires the real economy to grow faster and faster, in order to keep up
with these debts.

These boom and bust conditions do not exist in community currency systems.
Money in a community currency system is created by the members whenever they
purchase or sell goods and services. It is therefore explicitly backed by
those resources. On the other hand, systems which use notes as their medium
of exchange, must carefully monitor the money supply in their community to
avoid similar problems. The managers of the HOURS system spend a great deal
of time adjusting the money flow to the resources available for trade.

While interest-bearing national currency is a powerful tool for the money
lenders to extract resources from a community, community currencies are a
means for communities to reduce their dependency on it. The goal is to
provide enough Œbreathing space¹ for the creation of a sustainable economy
with fair values and prices, which are decided by the local economic and
social context.

Apart from the benefits on a local level, the concept of community currency
provides a practical basis from which to begin reform of the current
monetary system. Interest free currencies backed by goods and services
relink the financial economy with the real economy, avoiding painful, and
seemingly endless, swings from overheated growth to recessionary collapse.

* * * * * * * * * *

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Luis Lopezllera and PDP

Luis Lopezllera Méndez, originally an architect & universitary professor on
design, has 40 years experience of continous social work with grassroots
level groups in urban and rural areas in Mexico. He is currently the
president of Promocion del Desarrollo Popular (Promotion of Popular
Development, Civil Association). This NGO was created over 30 years ago,
with the purpose of finding ways od self-organization and common progess for
peasants, workers, suburban settlers, and indigenous people. The PDP has
promoted many national micro-development projects (financial, educational,
cultural, etc.), workshops and conferences. PDP is also involved with
several international networks, like the IGGRI (International Group on
Grassroots Initiatives) focused on grassroots efforts to find alternatives
to the present crisis.

Luis is editor of "LA OTRA Bolsa de Valores" (THE OTHER Stock Exchange),
representing a network of many grassroots organizations and NGO¹s in Mexico
and abroad, exchaniging knowledge related to self-reliance and
sustainability. At the government level, the group is currently in dialogue
with the office in charge of micro-enterprise promotion. Outcomes of group
activities are published in a magazine, which is distributed in Spanish, but
with supplements in English, French and Portuguese, to almost 850
organizations in 70 countries.

Triggered by the Mexican crisis, with its persistent social and economic
impacts at the grassroots level, the PDP and "LA OTRA Bolsa de Valores"
created a platform in which causes and impacts of the financial crisis and
its alternatives could be discussed. "We are deeply interested in the money
issue, trying to understand why civil society and many NGO¹s, and, indeed,
practically all individuals and communities, can not overcome their
dependency on it. Money has caused frequent bubbles, it leads to various
crisis, we are all competing for it and are divided by it. The financial
crisis caused a slump in economic activity, high unemployment and severe
poverty, while people, their labor and capabilities, and local resources
were still available." This may sound familiar for Thai participants.

Through TOES (The Other Economic Summit), Luis got in touch with individuals
and groups who had started community currency systems. After visits from
community currency systems practitioners in Canada and the United States,
Luis visited France, where numerous communities had also started their own
currency systems. Inspired by these experiences, and with the help of his
friends in the NGO community, Luis started a community currency system
called Tlaloc.

Community Currencies in Mexico

Three years ago ŒLA OTRA Bolsa de Valores¹ launched a community currency
system, known as ŒTianguis TLALOC¹ (in Aztec, Tianguis means Œmarket¹ while
Tlaloc is taken from the name of one of the highest divinities in the Aztec
cosmology, related to water, rain, thunder and life). In this system
products and services are exchanged using an alternative currency called
TLALOC, alongside the national currency. Members have accounts where local
trades are recorded, but also may choose to use notes as the medium of

The TLALOC bill represents one hour of social work and by common convention
it has the equivalent of 30 pesos (approximately $10US). There are several
denominations: 1Ž2 Tlaloc, 1, 2, 3, 4 and 5 Tlalocs. Every member of the
network of producers, servers and consumers has signed a letter of agreement
and has received 15 and a half Tlalocs to start trading products and
services with other members of the Tianguis (social market and network). He
or she also receives 50 Tequios (tokens) (ŒTequio¹ is an Aztec word meaning
Œcommunal effort¹). One Tequio is equivalent to one Peso. While the Tlaloc
plays the role of bills, the Tequio plays that of coins. It is recommended
that members accept at least 30% of the price of a transaction in Tlalocs
and Tequios. Pesos are accepted, but the policy is to increase the use of
Tlaloc as much as possible.

Every Tlaloc bill must be signed by the Œissuer¹ and the Œreceiver¹. The
Œreceiver¹ becomes and Œissuer¹ when the bill is next used by her to
purchase goods or services. The bill can be endorsed ten times and then the
"Eco-Bank" can exchange it for a new one. This process is called

Every member of the network is in a quarterly directory where offers and
demands for goods and services are publicized. Members are people living in
Mexico City and its surroundings; the intention is to bridge urban and rural
people. There are approximately 150 microenterprises registered as members.

Perhaps more important than the economic benefits are the opportunities to
strengthen he local social fabric. Monthly fairs are organized to allow
producers and consumers to meet face to face, and to create solidarity
through a new spirit of exchange--not just goods and services but also
cultural and ecological values, like spiritual traditions, art, music,
entertainement, bio-energetics, health and a sort of intergenerational
party. Children take center stage.

The experience of Tlaloc has the interest of "El Barzon Movement". This
movement has 1,000,000 members throughout Mexico. Most members are deeply
indebted and many micro-enterprises are struggling after the 1995 crisis, as
banks will not give them new loans. Various groups in the Yucatan peninsula
want to start their own community currency system and PDP will assist them
in their efforts. PDP have also just finished a proposal for creating a
communal currency (or extending theirs) in Xochimiclo, a famous bioregion on
the outskirts of Mexico City.


Gesell, S.. The Natural Economic Order, translated from the German edition
by Philip Pye, Neo-verlag, 1929.

Lietaer, B.A.. Community Currencies: A New Tool for the 21st Century, from
the Internet.

Powell, J., Salverda, M.. A Snapshot of Community Currency Systems in Europe
and North America, 1998.


Tláloc 40-3, 11370, México D.F.
Tels.: 5535-0325 y 5566-4265, Fax: 5592-1989