Editorial
IPRO UP – Ana Domínguez went to the ATM to extract money to pay for household expenses and to do grocery shopping for her mother, who has not left her home for four months due to quarantine.
She withdrew 100 peso bills and some 500 bills, and thought: “Why is it so difficult for her to give you 1,000 peso bills? It’s not even $ 8 to convert to blue. “
I was right. Is that the highest denomination paper in Argentina ($ 1,000), if it is divided by the almost $ 130 that the cash is quoted with settlement, means less than 8 dollars.
Meanwhile, if the conversion is made to the “solidarity” price, it would only be a few US $ 10.
For now, it is a squalid figure when compared with the purchasing power of hard currency of the highest denomination banknotes from other countries.
In the region
The Argentine “hornero” allows you to buy less dollars in relation to the banknotes with greater purchasing power in several South American countries, namely:
- Peru: the 200 soles is equivalent to US $ 57
- Uruguay: 2,000 Uruguayans is equal to $ 45
- Colombia: 100,000 Colombian pesos represents u $ s27
- Chile: with 20,000 Chilean pesos you buy US $ 25
- Brazil: 100 reais today is only equivalent to US $ 18, due to the strong devaluation of recent months
- Paraguay: a 100,000 guarani bill is exchanged for $ 14
All the cases exceed the relationship that exists in Argentina between the banknote with the highest denomination and its equivalent in dollars, either at a blue or a solidarity price. Furthermore, taking into account the official one, 13.5 dollars would be obtained, even below the 100,000 guaraníes paper.
It happens that the marked depreciation suffered by the peso both in this year and in 2019 caused the relationship between the 1,000 bill and its dollar equivalent to be increasingly lower.
So much so that “it has already lost 85% of its value since its debut,” they point out from the Libertad y Progreso consultancy. For now, there are more and more voices and demands – especially from the banks – for the Central Bank to issue a higher denomination note.
So far this year, the BCRA has already issued more than 1.35 trillion pesos to cover the fiscal deficit and finance subsidies such as the IFE (Family Emergency Income).
But there is more: only in June, the two printing plants of the entity put into circulation:
- 50 million $ 1,000 bills
- 2 million $ 500 bills
- 12 million $ 200 bills
- 540 million $ 100 bills
In this context, at the beginning of July an international tender was launched for the printing of $ 500 units: 250 million banknotes that, once completed, will be put into circulation. And the importation of $ 1,000 papers from Brazil is very close to being closed.
This is how the $ 5,000 issue was again among the trending topics for discussion in the City. “President Alberto Fernández has already said that it was studied and decided not to. Until now, no, there has been no change on that decision ”, the officials briefly respond to iProUP about this possibility.
Higher denomination, higher inflation?
Although the discussion at the time focused on who would be the personalities that could be on the new bill, the reality is that the government’s refusal to issue one of 5,000 is due to the fear that this could trigger what is known as “inertia inflationary “.
Unfortunately there are no $ 1,000 bills either. “The Mint is issuing all it can but it is not enough. Everyone has doubled or tripled the amount of cash, “says the president of Banco Macro, Jorge Brito.
And he adds: “It is important to prevent conflicts. Taking out a $ 5,000 bill would be ideal to avoid them when you have to pay the December bonuses. If not, it will be a serious problem ”.
According to the sources consulted, it is not that the Government intends to “hide” the advance in prices, since today there is no situation similar to that of 2010, when the INDEC did not measure real inflation. On the contrary, with the normalized body and in charge of Marco Lavagna, no one doubts that the index that is released month by month is what it really is.
However, there are economists who think that in a country like Argentina – which has already had high inflation for 15 years and in which not only monetary policy has an impact, but also wages, the price of tariffs and other macroeconomic variables – At this time, it would not be wise to bet on a 5,000 bill because it would increase the so-called “inflationary inertia”.
What does it mean? That this new role would cause expectations to be even higher than the current ones: the consulting firms that participate in the Market Expectations Survey (REM) of the Central Bank itself already place the price index at around 52% for this year.
“Taking out a paper with a higher denomination does not mean recognizing that there is a higher inflation than the real one”, warns iProUP the economist Carlos Pérez, who was director and general manager of the Central Bank when the presidency of the organization was Martín Redrado..
The $ 5,000 bill with the image of Ramón Carrillo and Cecilia Grierson
According to the expert, “there is room to double the denomination of the highest value banknote, but perhaps not to quintuple it due to the effect of inflationary inertia”.
However, the 5,000 peso paper would be a highly efficient tool for the following reasons:
- The BCRA would have to spend the same amount of paper money and ink that it consumes to print 1,000 bills
- Printing, the cost of making the new plates would already be discounted, because the tests had been sent for a long time
- Logistics would be simplified by distributing more money in a much smaller volume, which would make it easier for banks to recharge ATMs and save on banknote storage space
- It is not by chance that it was precisely a banker like Jorge Brito who demanded the printing of a higher denomination banknote from the Government. In addition, he experiences this problem in his own flesh, since he receives numerous complaints from customers who have to go “several times to the ATMs” to obtain the amount they are looking for “because only one hundred bills were delivered.”
