By Adam Dubove
For the first time in years, lawmakers from Argentina’s ruling Front for Victory coalition have proposed upping the size of the country’s largest denomination banknote to AR$200.
Congressman Carlos Kunkel, author of the initiative, claims the measure has nothing to do with inflation, which runs at 25-35 percent annually, according to private estimates.
Instead, the larger bill — US$12.50 at the black-market rate — would “reduce the cost of printing and circulating money,” Kunkel told a local radio station on October 8. “It will be more convenient for the people.”
Opposition lawmakers have unsuccessfully lobbied for the printing of AR$200, AR$500, and AR$1,000 bills in the past to cope with mounting inflation.
Contrary to government figures, the Massachusetts Institute of Technology’s Billion Prices Project found that the price of essential foods has increased six-fold in the South American nation since 2008.+
The new banknote’s design features former President Hipólito Yrigoyen (1916-1922 and 1928-1930), a renowned leader of the opposition Radical Civic Union (UCR) party, and celebrates the Cry of Alcorta, an agrarian rebellion of the early 20th century.
The move, however, has UCR activists up in arms, who say they don’t want their leader associated with the loss of purchasing power. The party’s community manager derided the initiative by publishing an image of the former Radical president giving a bras d’honneur.
Inflation Begets Larger Bills
The Cristina Kirchner administration has ignored repeated requests by economists, banks, and other financial institutions to issue larger-denomination bills. Some 42 percent of Argentineans deemed it necessary in a 2014 survey by Argentina-based pollsters Poliarquía.
However, President Kirchner chose to redesign existing notes instead. Earlier this year, the government introduced a new AR$50 bill depicting the Falkland Islands, an archipelago in the South Atlantic ocean subject to a lingering territorial dispute between Argentina and the United Kingdom.
In 2012, Kirchner launched a AR$100 bill with the face of Eva Perón, the wife of former President Juan Perón and an iconic figure for Peronists. Most recently, the government updated the AR$10 note, adding security improvements and revamping the image of founding father and creator of the Argentinean flag Manuel Belgrano.
The new designs, however, have done nothing for Argentineans’ increasingly bulky wallets. “Printing money out of control generates inflation, and that renders larger denomination bills necessary,” Iván Carrino, an economic analyst for IG and author of Cleptocracia, tells thePanAm Post. “Trading large sums has become an inconvenience.”
In a country where real-estate transactions are normally done in cash, even buying a new car can be burdensome and potentially dangerous. Since a new vehicle costs no less than AR$100,000, buyers need to carry at least 1,000 bills, Carrino explains. “You need to take a bag with you.”
According to the Central Bank of Argentina, two-thirds of the notes in circulation are AR$100 bills. ATMs quickly run out of smaller denomination notes as withdrawal rates increase. “Today, you go to an ATM, and they don’t have AR$50 or AR$20 notes anymore,” Carrino says.
The Argentinean National Mint has been unable to cope with the public’s demand for cash, and the government has outsourced the printing of bills several times. This year, the government has contracted Chilean and Brazilian mints to print additional cash ahead of the holiday season, according to local media reports.
Between January and August 15, 2015, the Central Bank printed 519.4 million AR$100 bills — 52 kilometers worth, if the bills were placed side by side.
Argentineans know inflation all too well. Since the creation of the Central Bank in 1935, the country has only experienced five years of inflation between 0 and 2 percent, according to Nicolás Cachanosky, Denver Metropolitan State University assistant professor of economics.
“Inflation is a consequence of money printing, and this leads to the necessity of larger denomination bills,” Carrino concludes.