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Yeah, that makes sense. Coins are clearly more durable, and for denominations that are handled frequently in places without access to federal reserve replacement, durability wins over preference / aggregate weight and volume.

In mainland US, preference for paper $1s isn't unduly burdensome. As a merchant, deposit the worst of the $1s and use the rest as change, no big deal. As a consumer, if someone doesn't take your grimy, half torn $1, try it a couple more places and then take it to a bank (perhaps even your bank). But it's unsurprising that doesn't really work for El Salvador.