Argentina launches 2,000 peso note after record inflation – 05/22/2023 – Market

As soon as the Central Bank of Argentina published on social networks that the 2,000 peso note entered circulation this Monday (22), memes began to pop up. “This one is what we need,” wrote an internet user above a photo of the new banknote with a zero added, that is, 20,000 pesos.

Now, the highest value ticket in the country is equivalent to around R$ 20 or US$ 4 in the parallel “blue” rate, which governs the day-to-day life of Argentines. This represents twice the current highest bill, a thousand pesos, which eases —but does not solve— the problem of those who have to walk around with wads of money in their pockets.

Since the beginning of last year, inflation has not stopped growing in the neighboring nation, which makes the currency “melt” and rapidly devalues ​​in the hands. In April, the index hit another record, reaching 109% in the last 12 months, the highest number in almost 32 years.

The launch of the note had been awaited since February, when the Central Bank announced the creation of the note. Both locals and tourists, in general, use cash on a daily basis, which creates security problems and also logistical headaches for companies and banks.

It is estimated that almost half of commercial transactions in the country are still carried out “en efectivo”. The thousand-peso notes are the most coveted and represent 77% of currency circulation in the country, twice as much as four years ago, according to calculations by economist Nicolas Gadano, who was general manager of the Argentine Central Bank.

Pressured by various sectors, such as Fecoba (Federation of Commerce and Industry of the City of Buenos Aires), the Central Bank, which is controlled by the Peronist government of Alberto Fernández, gave in and began to manufacture banknotes. The idea is that they would only be ready in June, but improvements in production shortened the deadline.

“As the payment digitization process progresses, this higher value banknote will allow for an improvement in the functioning of ATMs and, at the same time, an optimization of money transfers”, the financial institution wrote in a statement. It is also stipulated about the making of tickets of 5,000, which is not confirmed.

The new pinkish gray banknote will be progressively distributed to banks across the country, according to the BC, which highlighted security measures such as a watermark and an ink that changes color with a three-dimensional dynamic effect, in addition to a slight relief perceptible to the touch. by blind people.

The banknote design is a tribute to the development of public health, science and medicine in Argentina, featuring the faces of the first female doctor, Cecilia Grierson (1859-1934), and the country’s first Minister of Health, Ramón Carrillo (1906- 1956).

The neighboring nation has been mired in economic instability for decades. In 40 years of democracy, completed this year, the country has gone through nine major crises, maintaining today the same GDP per capita as at that time.

Now, it is experiencing yet another worsening of the situation just a few months before the presidential election, in October, with increasing poverty, forecast of recession, falling revenues, lack of dollars and accelerating inflation — last month alone, the general index was 8.4%, twice the amount recorded in the entire last year in Brazil (4.2%).

Given the situation, the Minister of Economy Sergio Massa, pre-candidate for Kirchnerism, has been announcing successive packages to try to contain the social impacts and stabilize the value of the peso. A week ago, it raised interest rates for the third time in a month, to 97% a year, intervened in the foreign exchange market and expanded social benefits.