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If you are going to stay in Puerto Vallarta and not venture into the smaller surrounding towns, then USD will do you fine. However, expect to get your change in pesos, or not at all. They have no use for american coins there.
I've always used pesos, and when you go to the smaller villages, sometimes this is a better idea.
If you get a chance, you should visit Yelapa. Tell them a girl with red hair and tattoos sent you :P
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