Show Me the Monedas!

The lack of coins in circulation in Argentina turns relatively simple tasks such as buying lunch or catching a bus into complicated transactions. Without coins, using public transport in Buenos Aires is near impossible. In shops, customers are offered substitutes for monetary change and owners lose revenue by selling products at reduced prices, as they are unable to give customers change.

Anyone travelling regularly by public transport knows the struggle of finding small change for their journey. On the subte, the lack of coins results in many passengers travelling free, even after the introduction of multiple journey travel cards.

Transport company Microomnibus Norte S.A. offers one reason for demanding fares in coins: “If the driver had to calculate the change for each fare he would have to stop the bus, which slows down the service.” The fact that the 100 bus lines in Buenos Aires city are owned and operated by more than a dozen private companies has also made the production of a single electronic travel card difficult.

The shortage, however, does not only affect commuters. Some kiosk owners have allegedly taken to bribing bank clerks with chocolates and gifts in the hope that they will change their notes for coins to avoid losing out on revenue by undercharging.

Although it is considered a nationwide issue, the main problem is in the city of Buenos Aires and its surroundings, where one-third of the population currently lives.

How did it happen?

Many conspiracy theories circulate as to the whereabouts of the coins. Some believe that farmers use them in harvesting. Some suspect tourists of hoarding them as souvenirs or turning them into keepsakes. Perhaps slightly more plausibly, some believe that due to rapid inflation, the metals with which the coins are made have now become more valuable than the money itself. It has been therefore been suggested that people are melting coins down and selling the metal for scrap at a higher price.

This claim was dismissed by the Central Bank of Argentina (BCRA), as statistically speaking, the value of the coins remain more than the metals they are made of. Yet, two years ago, the components of the 5 and 10 cents coins were changed from copper and aluminium to a cheaper lead alloy to save money in production. This in turn gave rise to another problem – although the dimensions of the new coins were identical, some machines had problems accepting the new composition.

Although the government puts current inflation figures at around 9%, independent economists say 25% is a more realistic figure. If, therefore, the prices of metal do not fluctuate dramatically, and inflation continues at current levels, it is likely that within two years, this theory will become reality.

History shows us that this can happen. In Germany, 1923, bank notes became so worthless that people used them as wallpaper or fire fuel. Bills of up to DM50m were in circulation; a loaf of bread cost DM1m and a beer was DM4m. But the largest bank note on record belonged to the Hungarian economy, where, during their period of hyperinflation in the 1940s, notes of 100 quintillion pengõ were available.

Who is to blame?

In recent years, it has been alleged that bus companies sell some of the coins they collect on the black market, specifically to Chinese supermarkets, instead of reintroducing them into the system to be circulated evenly. The government is aware of this activity, and President Cristina Fernández de Kirchner recently explained how she hopes the implementation of an electronic travel card system will “stop the illegal business of selling change for profit”.

For everyday citizens, obtaining change was made more difficult when the BCRA admitted the coin shortage is a genuine issue, as high street branches became less cooperative in handing out change. Some shop owners now illegally pay $100 for between $88-97 of coins. Buenos Aires kiosk owner, Sergio Gignoli, says, “luckily, I can get change on the black market, but everything comes at a price, and it costs me 10%.”

However, Fernando Meaños of the BCRA says these black markets are to blame for the lack of coins. He described them as the “main problem, stopping the coins from becoming available for the public”. The fact that the coins are made out of alloys makes selling existing coins more profitable than manufacturing counterfeit ones.

On 7th October last year, the Argentine government passed a law stating that anyone found guilty of reselling coins at elevated prices would be fined $2,000 minimum, depending on the volume in question. Transportation company Maco S.A. is one of the businesses currently being investigated. They deny the allegations, claiming instead that they go to extra effort to “reintroduce change in several places [across the city] making it more readily available for the public”.

Potential solutions

Under Argentine law, “coin hoarding” is not illegal. Therefore, in order to pursue a conviction, the Ministry of Justice had to fill the loophole in the law by claiming that hoarders and dealers alike were a threat to national security.

In one of several raids that occurred days after the law was passed, police in Buenos Aires seized 134 barrels of coins from an unnamed money-transport company. After three weeks counting, police revealed that 21 of the barrels contained counterfeit money, but the other 113 held close to $5m in coins, waiting to be resold on the black market.

Unfortunately, the problem is not contained within the criminal underworld. Several banks, including Spanish giant Santander, is under investigation for not handing out change to customers, as they are legally obliged to do.

This duty is often denied by the clerks in an effort to guard change. Despite the fact that the maximum they are allowed to change was reduced last year from $100 to just $20, some banks claim that they can only change $2. The BCRA now encourages people to report banks who do not hand out change via their website or special hotline.

Additionally, in October last year, the government established several organisations on a trial basis with the purpose of changing money for ordinary citizens and alleviate the pressure on banks. Like in the banks, the limit was $20, but the scheme was unsuccessful. So high was the demand for change that large queues formed and they regularly ran out of change before lunchtime. The majority of these centres were closed down within a few months, although a small number remain in the busiest areas of the city.

On 4th February of this year, after several delays and a $200m government investment, President Kirchner announced that an interchangeable bus and subte electronic travel card would be implemented in 90 days. The president described how the card would “improve the quality of life for public transport users and gradually solve the problem with the lack of coins”. She claims that “for the moment, the purpose of the electronic card is not to eliminate the use of coins in public transport, but to work side by side with the existing system”.

The BCRA claims that in 2008, there were 13% more coins manufactured and circulated than in 2007 and that now, for every Argentine citizen, there are $100 in coins available in the system, yet Meaños admitted that “in reality, the coins that are available are insufficient” for the number of people attempting to use them. He also claimed the BCRA have “improved the production system for making coins which has allowed [them] to dramatically increase the volume available over the last two years”.

However, measures similar to these have been in place for two years, yet every year the volume of coins does not meet public demand. Argentine citizens therefore remain sceptical about renewed promises of a solution.