Where are Argentina's coins?

FROM:
http://www.globalpost.com/dispatch/a...-cash-problems

Where are Argentina's coins?

A serious shortage of coins in Argentina causes problems for consumers and
merchants.

By Anil Mundra
Published: May 11, 2009 07:35 ET
Updated: May 11, 2009 11:55 ET

BUENOS AIRES - Think you've got cash problems? Just
be glad you're not in Argentina.

No one knows the inconveniences of the peso better than
Buenos Aires's convenience store owners. Walter Teich
and his wife opened one right in the center of town
three years ago. He's seen a lot of coins come and go,
but never so few as right now.

"There's no coins, they don't exist," said Teich,
standing next to a hand-written sign taped to the cash
register telling his customers as much. "And it's
getting worse all the time."

The coin scarcity has created a strange predicament:
Merchants regularly refuse to sell their goods or
services if it means they'll have to give coins back
as change. For small transactions, they'd rather lose
the revenue than spare the change.

Teich, for example, won't make a photocopy - and earn
his 20 cents - for anyone who doesn't offer exact
change. He simply doesn't have the coins, even after
he and his wife make separate trips to the bank to buy
the daily 20-peso coin ration that the government
guarantees.

And even the guarantees don't always work. Many of the
banks are as loath to let go of their coins as the
small businesses are. A spokesman for the Central Bank
of Argentina says that 14 of the largest banks in the
country have already been fined 10,000 pesos - about
$2,700 each - for failing to change bills into coins.
Advertisements can be seen all over the city promoting
hotlines for complaints against banks.

The scarcity has prompted everyone to overvalue coins.

Black markets have reportedly cropped up for the resale
of coins at more than 7 percent above their face value.
And starting in June in Buenos Aires, more than half of
the 3,200 members of the Chamber of Chinese Supermarkets
(ubiquitous small groceries run by immigrants from China,
not markets of Chinese food) will start issuing their
own special bonds as change for purchases, worth 10
percent more than the coins they would otherwise give
customers. The move is expected to cost the groceries
less than the 450 to 600 pesos ($120 to $160) they spend
weekly buying coins on the black market, according to
chamber estimates.

The cause of the coin scarcity isn't clear. The Central
Bank says it's supplying enough: a record 524 million
new coins in 2008, up 13 percent from 2007. This year
will likely bring a new record, and there are supposedly
5 billion Argentine coins currently in circulation - about
125 per person.

Many blame coin hoarders and black-marketeers, several of
whom have been caught. But they seem to be effects, rather
than causes, of the shortage. Another scapegoat is the
city buses, which until now have only accepted coins.
The role of buses may soon be seen, once a promised
electronic card system takes effect. But history makes it
hard to blame the buses too much: The city bus was
introduced in Argentina almost a century ago, while the
coin problem is new.

The shortage might have been precipitated by the rise in
commodity prices in the last few years, said Dardo
Ferrer, chief economist at the Market Foundation. There
have been reports of people inside Argentina and across
its borders melting coins for their metal, which became
worth more than coins's face value when the price of
raw materials rose.

But even high-rollers who manage to avoid small change
face another perennial problem: counterfeit bills.
Argentina's economy is, in Ferrer's words, a "propitious
climate" for banknote forgery. Compared to most of its
neighbors, Argentina has enough money going around to
support this moderately high-tech crime, but not enough
to combat it with all the security measures that richer
countries have.

The omnipresence of counterfeit bills here is almost as
apparent as the absence of coins. The same small business
owners that refuse to give change scrutinize all bills
over 20 pesos, rubbing them and tilting them and holding
them up to the light, sometimes even under an ultra-violet
lamp. New arrivals at the international airport receive
leaflets about how to spot fake banknotes.

"Everyone I'd spoken to about Buenos Aires added an aside
about keeping an eye out for bogus notes," said U.S.
citizen Season Butler on a visit to Buenos Aires from her
home in London. But she never thought to check what she
got from an ATM at a large bank in a posh section of town.
She only discovered later that she had gotten not one but
two false bills from the machine, leaving her stuck with
150 non-pesos - about 40 non-dollars - and no recourse.

"Generally, counterfeit money circulates through
institutional routes," Ferrer said . "There are very weak
controls in the banks. Counterfeit notes are practically
permitted."

Which leaves peso users between a rock and a hard
place - or, more concretely, between fake paper and no
metal at all.


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