Sources in the banking industry in Argentina told Bloomberg that banks in the nation are running out of space to store the country’s rapidly depreciating National currency banknotes.
Bloomberg reported that Banco Galicia and the local unit of Spain’s Banco Santander have had to install multiple extra vaults to store their peso bills. Over the past year, Banco Galicia was forced to add eight vaults just for cash storage, on top of the two it had used since 2019. Reportedly the bank will add two more in the coming months.
Argentina has been plagued by economic instability, despite being the second-biggest economy in South America after Brazil, and the problems have only gotten worse in recent years. In 2020 the nation once again defaulted on its national debt, and it has been forced to implement capital controls in an effort to protect its currency.
As the nation owes about $40 billion to the IMF, inflation is almost at a rate of 100%.
Although the country’s largest banknote, worth 1,000 pesos, is worth $5.40 on official exchanges, on an informal exchange last week, it barely reached $2.65.
As prices have surged, Argentinians have had to carry hundreds of banknotes just to cover the costs of ordinary purchases. As the numbers of bills needed to cover transactions increase, transactions are becoming increasingly difficult.
According to the central bank, the amount of money in public circulation has skyrocketed recently, from 895 billion pesos in 2019, to 3.8 trillion today. Banks and business groups have been begging the central bank to print higher-value bills for years, noting it would increase the efficiency of performing transactions for citizens, banks and businesses.
Earlier this month, Fabian Castillo, head of the Federation of Commerce and Industry of Buenos Aries (FECOBA) said in a statement, “Transporting, mobilizing and withdrawing a greater number of bills every time increasingly provokes unsafe situations beyond creating complications and expenses.”
Mario Grinman, the president of the Argentine Chamber of Commerce and Services (CAC), also emphasized that there should be at least a 5,000 peso bill.
In an interview with news outlet La Nacion, he said, “Since its appearance in November 2017, the 1,000 pesos has lost almost 100% of its purchasing power. In 2017 it covered almost half of the basic basket and today it does not reach 6%. Today to go to the supermarket you have to carry a bag of banknotes. Logistically it is a disaster.”
Last week the central bank refused to comment on the requests for larger denominated bills.
