... steps that the Mexican government must address once the decision to dollarize has been made. One of the main issues in dollarization is the exchange of all the Mexican peso currency into US dollar notes. This exchange will be handled by the current Mexican central bank. The central bank will have to exchange all of its reserves for US dollars in order to be able to float the new currency within Mexico. In dealing with this exchange, the Mexican government must address the issue of foreign reserves within its central bank (Id.). The central bank in Mexico will typically have almost no physical foreign notes, because the notes themselves do not pay any interest (Id.). However, the bank will likely hold foreign currency deposits at foreign banks, in addition to foreign government bonds (Id.). Although reserves such as these are not suitable for dollarization (direct exchange for dollars), if the foreign ...

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