Government imports bank notes to meet thirst for cash

The government is rushing to import bank notes as the national mint struggles to keep pace with soaring Central Bank issuance and inflation of more than 40 percent.

The Casa de Moneda is importing printed bills for the first time in five years, and is also boosting its purchases of the paper used to make banknotes, three people with direct knowledge of the matter told Bloomberg reporter Ignacio Olivera Doll this week.

The pace of monetary issuance has accelerated in recent months as the Central Bank creates pesos that the government then uses to pay for its coronavirus stimulus plans. The bank has transferred 1.3 trillion pesos (US$19 billion) to the administration so far this year.

Economists have expressed fears that the stimulus plans will be financed solely by printing money, which would add fuel to runaway inflation.

The nominal value of bills and coins in circulation jumped 80 percent this month from a year earlier. The pace at which consumer goods prices are rising increases households’ need for cash.

Full capacity

The mint is currently operating at 100 percent capacity for the first time since 2015, and has stepped up purchases of the raw material for its banknotes from abroad, the sources told Bloomberg, asking not to be named because the discussions were private.

Sweden’s Crane Currency is providing paper to print 1,000-peso bills while Russia’s state-owned Goznak is providing the paper for 200-peso bills, they added. 

There’s also an ongoing international tender to import 250 million bills worth 500 pesos each, according to the Official Gazette.

A spokesperson for the mint said that if this tender is successful, there won’t be any shortage of bills. A Central Bank spokesman said the institution isn’t seeing any problems caused by insufficient bank notes.

The mint’s ability to meet the country’s demand for cash was undermined at the start of the year, when the government scrapped a plan to begin printing 5,000 peso bills for the first time, choosing instead to focus on existing high-denomination bills (200, 500 and 1,000 peso bills).

The bill’s design was complete in March but it was then shelved, according to the mint’s press office. If a 5,000-peso bill were in circulation, the mint could easily supply the country with enough banknotes, the people added.

The Casa de Moneda has supply agreements with Chile and Brazil, but both options were deemed too costly. The mint has two printing plants – one on Avenida Antártida Argentina and a new one, where the Ciccone Calcográfica firm once produced bills.

– TIMES/BLOOMBERG