Palma, Maracanã, Castanha, Cocal, Guará, Girassol, Pirapire, Tupi. The list of various names includes more than 40 local currencies that circulate in Brazilian neighborhoods and small towns where there are community banks, created to strengthen the economy in needy communities.
The worth of the local currency is identical to the real, the official currency of Brazil, but it is more valuable than the real because businesses give discounts for purchases made with this alternative money, according to Joaquim de Melo, founder and coordinator of Banco Palmas.
The bank is headquartered in Conjunto Palmeiras, a neighborhood on the South side of Fortaleza, the capital of the northeastern state of Ceará.
The use of the currency is simple: the local residents can trade the real for the local currency in a community bank and use it in regional businesses. If it is necessary to buy something with a real outside of the community where the bank is active, then a person can do the exchange in reverse.
The objective of the local currency is to have the currency circulate in the community. The practice increases sales and generates more jobs in those areas.
Banco Palmas is a pioneer in this area. It was the first community bank created in Brazil, founded in 1998. Two years later it brought out the currency of the same name, the palmas. The communitarian experience yielded such positive results that in 2005 the Network of Community Banks in Brazil was created.
According to Melo, around 240 commercial establishments are credentialed to receive the palmas. The attraction is the discount given by the business if the customer pays with in palmas. If they buy in reais, there is no discount.
“For the businessperson this means that the customer is loyal,” explains Melo. The practice aims to stimulate the use of the social currency.
“The real can be used outside of the community, generating wealth in other areas. The local currency has the power to generate wealth in the neighborhood,” he emphasized.
He estimates that there are around thirty-six thousand palmas circulating monthly in the region and there is already a palmacard, a credit card from the community bank.
Banco Palmas is now an example for the rest of the country. In the same building is the Instituto Banco Palmas, which offers courses on finances through resources acquired from the Bank of Brazil.
Melo explained that the incentive is also given by the Ministry of Work and Employment, through the National Secretariat of Economic Solidarity, “The Ministry is one of our partners and has supported the creation of community banks in the country.”
Today, there already are 50 community banks in the whole country. Just in Ceará there are 27 community institutions,… The expectation is that by 2012 there will be a thousand community banks in Brazil.
According to Melo, the local currency is owned and controlled by the community. “There is a very significant local control because the people who use the money know it best.”
The community itself benefits from the profits, which is different from what happens with the large banks when the money of the customers is used for financial transactions. “The community bank does not serve the speculation market. It just serves to generate wealth locally. This is economic democracy.”
The creation of community banks is done through the statutes of the Institute Banco Palmas. The institution does not need the authorization of the Central Bank, it only needs to inform them of the creation of a local currency.
The Instituto Palmas certifies the new currency through a seal and security features that protect against counterfeiting, just as is done with the real. The recommendation is that the local bills be distinct in appearance from the real.
The other provision is that the local currency is not worth more than official Brazilian currency and that for each unit issued there is a real in the community bank.
This measure aims to control the economy, if their alternative currencies are worth more or are printed more than the official currency, it can destabilize the economy of the country. “We report how much local currency is in circulation to the Central Bank.”