Few things say more about the health of a country’s economy than the state of its currency. In today’s Argentina, three signs add more concern to the one that already exists among ordinary citizens and businesses.
Just 10 days ago, the Minister of the Economy had to state publicly that dollarization is a “delirium”. The mere idea that this possibility crosses public discourse it is synonymous with the fragile stability that the government offers to Argentines.
The second goes unnoticed, but it’s an underworld trend. The 25 and 50 cent, and $1 and $2 coins are already hard to find. Due to its nickel, bronze or copper content they are worth much more melted than for their monetary value.
The latest indication came during a curious conference in which the president reported on a change promoted by the BCRA, a supposedly autonomous entity. “For an animal to replace characters of the stature of San Martín and Belgrano… It seemed impossible to silence them from everyday life, from what circulates through our hands,” said Alberto Fernández during the presentation of the new collection of banknotes, in which animals the natives will be replaced by heroes (men and women, this time) and, in the case of the $100 newspaper, the figure of Eva Perón.
It was a bombastic act, in which the word inflation and its impact on the low value of these bills was avoided. What circulates in the hands of Argentines burns with an annual inflation of 50.9% in 2021 and estimated at 70% for this year. Not adding a higher denomination bill is a clumsy political attempt to infuse the official story with more denial — silence — about the undeniable crisis. Nothing can offend history more than the devaluation of its heroes and its currency.
The numbers are devastating. In December 2017, the largest denomination note was launched, which today circulates -very quickly- from pocket to pocket. With this $1,000, US$53.3 was then purchased. Today, $4.9. This article is the last in the Latin America ranking: It is the largest denomination with the least purchasing power in the entire region. In fact, the banknotes that had the numbers of San Martín and Belgrano, that so much admiration arouses in the President, They were the $5 and $10. The first ceased to circulate in February 2020 and was replaced by coins, precisely because of its sharp deterioration in pace with inflation. The second is still circulating, but its replacement by coins is becoming more visible.
In 2017, with “a baker”, you could buy 47% of the basic food basket (measures the indigence threshold); Today, it barely reaches 7%. Then, 19% of the total basic basket has been reached (poverty limit); today only 3%. Five years ago, $1,000 bought 7.40 kilos of roast; currently it does not reach the kilo (0.95 kg). With this invoice, 44 liters of gasoline were purchased; today only 9 liters. Today, a $1,000 bill should be an inflation-adjusted $6,000 bill. The baker’s purchasing power today represents $165 of 2017.
Only those who have more can avoid the destruction of the currency, which is not the exclusive merit of the current government. The middle class is suffering. In the 1990s, a Volkswagen Gol cost $10,000, which meant that one hundred $100 bills (the largest denomination) could buy one. Currently, one hundred $1,000 ($100,000) bills cannot buy all four tires.
The poorest are those who suffer the most from this loss of value. In October 2001, $100 bought more than a basic food basket (exactly $60.50, or a basket of 1.65). There was something left of this banknote of the maximum denomination of the time. Today, the basket costs $13,763, so they need fourteen tickets.
“Wages reflect a 20% decline from the 2018 peak, although last year in particular increases in wages and pensions may have matched inflation, with the exception of informal worker earnings, which still reflect real declines and rack up losses of nearly 30% since 2018,” says an econometric report, which predicts another sell-off this year.
The fauna, flora and stuffed animals on Argentinian banknotes can be criticized, but when Cambiemos modified the paper money, it did so by incorporating three new denominations ($200, $500 and $1000). According to its promoters, the decision was made “taking care of the mango”. They give an example: the least viewed note in the animal series is the $100 note. It is that there were many “Evita” printed and, they say, it was a “waste” to replace them all with the current taruca.
They add a disturbing fact of what it means not to incorporate another denomination. Issuing only $100 bills then – if the $1000 bill had not appeared in 2017 – would have multiplied the cost of printing tenfold. A study of these dates found that having introduced $200 and $500 bills before – Kirchnerism had banned the BCRA from talking about inflation – would have saved $640 million. Another fact: the trees and flowers coins of $1, $2 and $5 are made of plated steel, which had no foundry value. The $10 one, on the other hand, is (it’s alpaca), but that $10 is still a lot for some.
Sources in the financial sector claim that the cost of transporting the new tickets launched by Alberto Fernández is not significant. On the other hand, the BCRA has not yet revealed the essential details to know the deadlines for its distribution: for them to be network-wide, they said, it can take three to six months, depending on the bank.
In the current administration of Miguel Pesce, they claim that a higher denomination note is not coming because the entity is pushing the payment system digitization process and the use of electronic money. “At this stage, it is not considered necessary to issue a larger bill,” they conclude, despite short circuits with fintech representatives and logistical warnings from banks.
But in May 2020, the BCRA had advanced in the analysis of a 5,000 dollar note. “He had very loose security threads,” said sources familiar with the rush. Cecilia Grierson and Ramón Carrillo were later mentioned as obverse figures. “Christina didn’t want to. He believes that it feeds inflation,” they justified the position of the vice-president, who affirms that the monetary question does not generate inflation.