Mexico & Thailand: Community Currency Systems

By Luis Lopezllera Mendez and Menno Salverda

Luis Lopezllera is director of Promocion del Desarrollo Popular (PDP) and initiator of the community currency system Tlaloc in Mexico. Luis came to Thailand on invitation of Focus on the Global South and the TCCS (Thai Community Currency Systems) Project.

Menno Salverda is co-director of the TCCS project that is 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.

This paper was prepared for the international conference "Economic Sovereignty in a Globalising World: Creating People Centred Alternatives for the 21st Century", held 23-26 March 1999, Bangkok, 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 in 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 "HOURS"-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 ("notes" or "coupons") 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 labour; or allowed to determine itself through members` exchanges. Community currency systems are backed by the resources within a community, including the labour 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 more 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 will yield income over the long run (suddenly it would make economic sense to plant trees). To spur this incentive, some community currency advocates have proposed a "charge" on the use of money. This is known as "demurrage". 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 "velocity" of money). (Gesell, S., 1929).

In 1972 the gold standard was abandoned. Since that time, money has been created as 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 continuously re-issue 10 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 moneylenders to extract resources from a community, community currencies are a means for communities to reduce their dependence on it. The goal is to provide enough "breathing space" 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.

Luis Lopezllera and the PDP

Luis Lopezllera Mendez, originally an architect & university professor on design, has 40 years experience of continuous 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 of self-organisation and common progress 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 organisations and NGOs in Mexico and abroad, exchanging 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 organisations 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 were deeply interested in the money issue, trying to understand why civil society and many NGOs, and, indeed, practically all individuals and communities, can not overcome their dependency on it. Money has caused frequent bubbles, it leads to various crises, 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 labour and capabilities, and local resources were still available." This might 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 "LA OTRA Bolsa de Valores" launched a community currency system, known as "Tianguis TLALOC" (in Aztec, Tianguis means "market" 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 exchange.

The TLALOC bill represents one hour of social work and by common convention it has an equivalent of 30 pesos (approximately $3 US). There are several denominations: 1/2 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) ("Tequio" is an Aztec word meaning "communal effort"). 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 "issuer" and the "receiver". The "receiver" becomes an "issuer" when the bill is next used by her to purchase goods or services. The bill can be endorsed ten times and then the "Eco-Bang" can exchange it for a new one. This process is called "multi- bartering".

Every member of the network is given space 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 registered units (micro-enterprises) as members, which can consist of several individuals. Perhaps more important than the economic benefits are the opportunities to strengthen the 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, entertainment, 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 Xochimilco, 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

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