The Ottawa Citizen, Wednesday, August 22, 2001 Page C4
New Currency Spans Anxiety
Argentines in Buenos Aires province fear patacons are worthless, David Plumb
reports.
Buenos Aires
The cash machine at Banco de la Provincia Buenos Aires spit out part of Carlos
Rodriguez’s $1400 U.S. monthly wage in crisp, 20-patacon notes.
“If I don’t know if my salary has been devalued or not,” said the 43
year-old Mr. Rodriguez, one of 160,000 employees and retirees in the province of Buenos
Aires getting paid in the new currency. “It depends on how I’ll be able to use
these patacons.”
As the patacon – a one year security with seven percent interest – went into
circulation yesterday, residents weren’t sure what is was worth. Economists said the
bills undermine the peso’s one-to-one exchange rate with the dollar, the
economy’s anchor for a decade.
The Buenos Aires province, Argentina’s largest with 14.4 million people, more than
one third of the nation’s population, printed $95 million of the new notes after
banks limited access to loans. Provincial employees began withdrawing in patacons the
portion of their July salary above 740 pesos – three weeks after the payment was due.
Other provinces strapped for cash, plan to follow Buenos Aires’ lead.
“When the pile of worthless paper the provinces are printing avalanches, the federal
government will not be politically able to stand by and just watch the Argentine people
suffer the consequences,” said Colin Negrych, manager of the Centaur Fund, a hedge
fund in New York.
The new money, which looks like an oversized peso bill, arrived as Argentine officials
entered a 12th day of negotiations with the International Monetary Fund for as much as $9
billion in new loans to help the country avert a default. In all, the federal and
provincial governments have $153 billion in combines debt.
Brazil’s GloboNews network reported Argentina may announce an agreement for new IMF
loans as early as tonight.
The benchmark bond, due 2005, fell 2.25 to an offer price of 67.063 to yield 32.5 per cent
on growing concerns a default is imminent. The bond was yielding about 17.5% in early
July.
Already some residents fear the patacon has no value. The province plans to print a total
of $400 million worth by year end in bills as small as one patacon – which has a face
value of one peso and pays seven per cent interest at maturity.
Eventually, the federal government plans to issue a new notes that would replace the
patacon and other provincial currencies, giving them nationwide circulation.
The provincial governor in Buenos Aires, Carlos Ruckauf, asked companies to accept
patacons as currency alongside the peso, and said they could be used as payment for
federal or municipal taxes. At the Alto Avellaneda shopping mall, Hugo Noblega
doesn’t trust the plan.
“We don’t know what to do with them,” said Mr Noblega, sales manager at a
branch of Kartum, acosmetic retailer. “My worry is – what happens if we take
them and then someone comes along and changes the rules?”
Water utilities Azurix SA and Aguas Argentinas SA, phone companiesTelefonica SA and
Telecom Argentina, Stet-France Telecom SA and railroad Metrovias SA have all agred to
accept the patacon. McDonald’s Corp. Said it expects to take the currency in exchange
for a new meal it plans, the Patacombo. Some banks said they would accept the notes as
payment on personal and home loans.
Osvaldo Rial, president of the Buenos Aires Province Industrial Union, offered “total
support” for the new currency while Alto Palermo SA, which runs seven shopping malls,
is negotiating with stores to accept the notes. Argentina’s world champion soccer
team, Boca Juniors, will let fans pay for tickets with Patacons, treasurer Orlando
Salvestrini said.
“For many months, people are not going to have another currency,” Mr Ruckauf
said yesterday in a telvised news conference. “Argentina is bankrupt.”
Bloomberg News, with files from Eliana Raszewski and Charles Penty
More details at these URL's:
www.cyberclass.net/bondcurrency.htm
&
www.cyberclass.net/pataconjct.htm