Saturday, December 6, 2008

the world's most annoying economic crisis

This is an article a friend sent to me about the coin situation in this city. It is in no way an exaggeration - Andy has been paid back in candy instead of centavos, and we know an Argentine women who is actually in the business of selling bars monedas (1 peso coin) for more than they are worth in paper money. It's ridiculous, you can only pay in centavos on the bus so every transaction feels like a stand off between you and the cashier - who's getting the coins.

It was no surprise that the cab driver tried to rip us off. We're in Buenos Aires, Argentina, after all, and we'd made the rookie error of requesting a vague destination instead of giving a precise address—naturally he interpreted this as a license to take us from LaBoca to the Plaza de Mayo by way of southern Nicaragua. What we hadn't expected was the predicament the driver found himself in when it came time to pay. The fare had come to 14 pesos and 6 centavos. I offered a 20-peso note (worth about $6.70), and he handed back 50 centavos,suggesting that I was going to be shorted 44 centavos. Then he realized that continuing on this course would require him to give me two 2-peso notes and a 1-peso coin. He sighed dramatically and gave me three 2-peso notes instead. Factoring in the 50 centavos he had already handed over, this effectively reduced the fare to 13.50 pesos,which, for reasons I'll get to in a moment, is actually more than14.50 pesos.
Welcome to the world's strangest economic crisis. Argentina in general—and Buenos Aires in particular—is presently in the grip of a moneda, or coin, shortage. Everywhere you look, there are signs reading, "NO HAY MONEDAS." As a result, vendors here are more likely to decline to sell you something than to cough up any of their increasingly precious coins in change. I've tried to buy a 2-peso candy bar with a 5-peso note only to be refused, suggesting that the 2-peso sale is worth less to the vendor than the 1-peso coin he would be forced to give me in change. When my wife went to buy a 10-trip subway pass, which retails for 9 pesos, she offered a 20-peso note and received 12 pesos in bills as change. This is commonplace—a daily, if not hourly, occurrence. It's taken for granted that the peso coin is more valuable than the 2-peso note.
No one can say what's causing this absurd situation. The government accuses Argentines of hoarding coins, which is true, at least to some extent. When even the most insignificant purchase requires the same order of planning and precision as a long-range missile strike, you can hardly blame people for keeping a jar of monedas safe at home. The people, in turn, fault the government for not minting enough coins. Infact, the nation's central bank has produced a record number of monedas this year, and the problem has gotten even worse. Everyone blames the bus companies, whose buses accept only monedas. (BuenosAires' 140-plus bus routes are run by a number of separate, privatecompanies.) These companies, exploiting a loophole in the law, runside businesses that will exchange clients' bills for monedas for a 3percent service fee. This is legal, but the business community also routinely complains of being forced into the clutches of a thriving moneda black market—run by the local mob, or the bus companies, or both—in which coins sell for a premium of between 5 percent and 10 percent. The bus companies steadfastly deny any involvement in this racket, but their claims were undercut by the discovery of a hoard of13 million coins, amounting to 5 million pesos, in one company's warehouse this October.

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