Thursday November 28, 1985,
The Charlotte Observer,
CASH-STARVED ARGENTINE PROVINCES TURNING OUT THEIR OWN MONEY
By Andres Oppenheimer, Knight-Ridder News.
MIAMI -- Two remote Argentine provinces, short of cash to pay public employees, have come up with an easy solution.
They're printing up their own money, to the chagrin of the national and international banking authorities.
"We are paying all our public employees with provincial bonds," Roberto Romero, governor of the northern Argentina province of Salta, said in a telephone interview. He said Salta started printing its own IOUs because it wasn't getting sufficient federal currency fast enough.
"People can change these bonds for money at any bank," Romero said. "They can use them to shop at supermarkets and to buy cars or any other products."
The Argentine government is not smiling, and world bankers are worried that other cash-starved states will copy Salta's financial extravaganza and jeopardize Latin efforts to curb inflation and pay huge foreign debts.
The International Monetary Fund (IMF), the world's main financial inspector for debt-ridden countries, was concerned enough to bring up the issue in recent talks with the Argentine government, said sources in Argentina and Washington. The IMF does not comment on negotiations with individual countries.
After Salta started quietly issuing its own IOUs in September last year, the nearby province of La Rioja started printing its own bonds too. Four other Argentine provinces have either begun adopting similar programs or are preparing to do so.
In all cases, the bonds are good only within the province where they're issued.
But the government of President Raul Alfonsin says the provincial bonds are expanding the country's money supply and are undermining efforts to remove Argentina from the list of world inflation leaders. Earlier this year, Argentina had a 1,000% annual inflation rate.
Alfonsin made headlines worldwide in June when he launched an austerity program built around a commitment to stop his government from printing money. Since then, inflation has dropped to 3% a month, a record low in recent history.
The bonds printed in Salta come in denominations of 10, 100, and 1,000 australes, the same as ordinary Argentine currency bills. They pay no interest and can be either exchanged for Argentine currency or
used to buy goods.
Romero, of the opposition Peronist Party, and officials of other provinces claim their bonds are not really new currencies because they are no good outside their provinces.