Argentina’s peso bills are depreciating so quickly as inflation approaches 100 percent that banks are running out of space to store bank notes.
Banks in the crisis-prone economy, including Banco Galicia and the local unit of Spain’s Banco Santander SA, are installing more vaults to store bank notes at a time the largest denomination bill is worth less than US$3, according to people familiar with their plans. Just last week, a business chamber in Buenos Aires called on the central bank to start printing large-denomination bills to tackle the increasing problems of transacting with an ever-greater number of bills.
The Central Bank has so resisted the calls to print a bill with denomination of more than 1,000 pesos, which on Wednesday was only worth US$2.65 when valued at commonly-used, informal exchange rates. With prices rising by nearly triple digits at an annual pace, the dilemma has left Argentines withdrawing dozens of bills at ATMs for ordinary amounts, while tourists often carry wads of cash.
For banks, which have to transport the cash to bank branches and ATMs, that also opens unique space challenges.
In response to the problem, Banco Galicia plans to open up two new vaults this year for cash storage, having already increased the total number of vaults from two in 2019 to 10 last year, according to a person with knowledge of the matter. This investment will allow it to expand its storage capacity by 30 percent to US$164 million in bills of 100 pesos, the person said.
Santander Rio is also taking on more vault space, possibly doubling its storage footprint, according to another person with knowledge of the matter, who asked not to be named discussing private plans.
Since President Alberto Fernández took office in December 2019, the amount of money in public circulation has quadrupled to 3.8 trillion pesos (US$20.8 billion) from 895 billion pesos, according to Central Bank data. Meanwhile, the 1,000-peso note has remained the largest denomination.
Spokespeople for Grupo Financiero Galicia SA, the parent company of Banco Galicia, and Santander Rio didn’t immediately comment.
A business chamber that groups small firms in Argentina’s capital called on the monetary authority to print larger bills to facilitate commerce.
“Transporting, mobilising and withdrawing a greater number of bills every time increasingly provokes unsafe situations beyond creating complications and expenses,” Fabian Castillo, head of Buenos Aires-based FECOBA, said in a statement.
A spokesman for Argentina’s Central Bank said no announcement was expected on larger bills and declined to comment on FECOBA’s request.
by Ignacio Olivera Doll & Patrick Gillespie, Bloomberg