The Weight of the Peso? Argentine Election Approaches

Recently, a friend returned from Argentina with roughly 1000 worthless pesos – worthless in the US, at least, but he had bought them with “blue dollars” and still came out ahead on his traveling costs there. Since he knew I would be traveling south soon, he offered them to me as a gift, as I had advised him on the arcane details of changing money there, but I paid him US$50 for the bunch – about 20 pesos per dollar as opposed to 16 pesos on the informal market in Argentina and 9.50 pesos at the official rate. It’s a relatively small amount, but will still come in handy the first time I cross the border (I’ll be visiting Chile first).

In Spanish, peso means “weight” and, in many Spanish-speaking countries, it’s also the unit of currency (roughly analogous to “pound” in the British English). Frequently, on this blog, I’ve pointed out problems with Argentine money – especially the inconvenience of carrying large piles of banknotes when the highest denomination is 100 pesos (about US$6 at the informal rate, barely US$10 at the official rate). Argentina’s outgoing government – the first-round presidential election takes place this Sunday – has resisted issuing larger banknotes, probably because it would draw attention to the country’s high inflation rates (as if rising consumer prices and the bulging wallets do not). This, I might argue, is an issue of weight.

That said, I’ve written primarily about micro-issues that affect visitors, but a recent article in the Buenos Aires daily La Nación points out other practical macro-issues in Argentina’s currency conundrum. In that article, one economist observes that the cost of printing any individual banknote is the same; thus, it’s a truism that it costs more to print 10 hundred-peso notes than it does two five-hundred-peso notes or one thousand-peso note. For banks, it also costs more to count and transport larger numbers of notes, and more wear-and-tear on ATM machines that need to be refilled constantly (foreign visitors, of course, should use ATMs only in an emergency, since they pay the disadvantageous official rate).

In any event, by Sunday evening, we should have some idea as to whether Argentines have chosen continuity – in the person of the official Peronist candidate Daniel Scioli – to replace outgoing president Cristina Fernández de Kirchner. He’s almost certain to garner a plurality, but it remains to be seen if he’ll be avoid a runoff against the more conservative Buenos Aires mayor Mauricio Macri. Whoever wins will have bigger issues to deal with, but even Scioli has indicated a willingness to embrace “gradualism,” to move away from the dogmatism of the Fernández de Kirchner years. In the longer run, that will have to mean resolving the exchange disparity and major economic issues, but simply printing larger-denomination banknotes would quickly redress an everyday inconvenience.