Argentina introduced a new larger denomination banknote on Monday, a concession to the runaway inflation that forces the population to carry ever growing stacks of cash to pay for everyday purchases.
The new 2,000-peso note, formally put into circulation by the Central Bank, is worth around US$8.50 at the official exchange rate, which is overvalued by currency controls and restrictions imposed by the government. At the more commonly used parallel exchange rates, it is worth only US$4.
The move was welcomed by financial experts yet criticised as insufficient. The highest-value banknote up until now has been the 1,000-peso bill. Underlining the devaluation of the peso over the last few months, the 2,000-peso note was due to be worth around US$10 at the official rate when its introduction was confirmed back in February.
"This higher denomination banknote will improve the operation of ATMs and at the same time optimise the transfer of cash," the Central Bank said in the statement announcing the measure.
Consumer prices rose 8.4 percent in April and annual inflation is running at 108.8 percent year-on-year, the fastest rate since 1991 when Argentina was emerging from hyperinflation.
Galloping price increases, along with a record drought, are expected to push the economy into recession before a presidential election later this year.
Economists surveyed by the Central Bank see annual inflation near 150 percent over the next 12 months.
Accompanying the measure, Economy Minister Sergio Massa also announced Monday a new agreement with banks to extend credit card financing as a measure to stimulate consumption.
The official also confirmed the expansion of the financial sector's lending capacity for small and medium-sized companies through current account overdrafts.
"We understand that this effort is going to have a very good impact on credit capacity and will increase consumption. We have work to do, to continue improving credit," saidMassa as he spoke to the press after a meeting with bankers.
The new policies are the latest in a series of measures designed to boost consumption, including a reduction in financing rates for 12-payment loans and a reduction of the interest charged on unpaid credit card balances, as well as tax refunds on purchases for the most vulnerable sectors of the population.
Bills, bills, bills
While the new denomination is an improvement over the 1,000-peso note, the new bill still disappoints private economists and citizens who have been clamouring for banknotes of up to 10,000 pesos. The rapid depreciation of the peso has caused logistical nightmares for customers, businesses and banks, which have had to open new vault space to accommodate more notes for ATMs.
In Buenos Aires City, a cafe con leche and medialunas, a traditional breakfast for many porteños, costs an average of 1,200 pesos and a sandwich with a soft drink in a fast-food chain costs around 2,000 pesos.
“The 2,000-peso bill helps, but it falls short. The 5,000-peso bill should arrive soon," said Isaías Marini, an economist with the Econviews consulting firm.
"The way in which people make payments in our country has been undergoing an important change, towards a greater use of electronic means," said the Central Bank in its statement.
The new banknote, in dark grey and pink, features the images of two prominent doctors in Argentina’s history, Cecilia Grierson and Ramón Carrillo, on the front. On the reverse is the prestigious ANLIS-Malbrán Institute that specialises in infectious diseases.
Grierson was the first woman to graduate as a doctor in Argentina and the selection of the Malbrán is a nod to the role it played during the pandemic. The choice of Carrillo, the doctor who accompanied Juan Domingo Perón as health secretary during his first two terms in office, was more controversial, angering some sectors of society.
Carillo has a strong reputation among the medical profession locally. As well as being Argentina’s first health secretary, he was a neurosurgeon who is remembered for his brilliant public health campaigns which helped to halve child mortality in Argentina, eradicate malaria and significantly tackle tuberculosis. During his eight years as minister, 244 hospitals were opened, according to reports.
However, his views on eugenics and support for the idea of the “perfect soldier” sits uncomfortably with the modern world. Leaders from Argentina’s Jewish community have also criticised Carillo’s historic links to Nazi Danish doctor Carl Peter Vaernet.