Argentine bourgeoisie turn to barter

By ALEX BELLOS Friday 24 August 2001

Amalia is dressed elegantly, wrapped in a luscious paisley scarf. She looks exactly as you would expect for an upper-middle-class Porteno, the name given to the residents of Buenos Aires. The Portenos have a reputation as Latin America's most glamorous, sophisticated citizens.

Except that Amalia, 65, is just keeping up appearances. She is penniless.

Amalia has come to a "barter club" with a piece of home-made knitwear that she is trying to exchange for barter credits. These credits, which look like Monopoly money, can be used in exchange for food, clothes or even haircuts.

"My husband used to have a shoe factory with 100 workers," she says. "We had two retail outlets. But we couldn't compete with cheap Brazilian shoes. Now we have nothing. If it wasn't for the credits, I don't know how I'd survive."

The growth of barter clubs, which started in 1995 and now involve about a million Argentinians, reflects the country's economic crisis.

The three-year-old recession is the worst since the 1930s and unemployment has reached record highs. On Tuesday, an alternative currency was introduced. More than 150,000 state workers in the province of Buenos Aires - which has 38 per cent of Argentina's population - were paid part of their salaries in patacones, one-year bonds.

The bonds, which look like bank notes, are already in the provincial bank's cash machines. Supermarkets and other outlets, including McDonald's, have said they will accept patacones and use them to pay state taxes.

Buenos Aires province was forced to issue the bonds because it did not have enough cash to pay salaries.

Rosendo Fraga, who runs a leading political advisory group, said: "Argentina has lost almost 30 per cent of its currency reserves since March. The provinces are already feeling the effects. It is in this context that they are printing the patacones."

He said that printing money like this would not create inflation, but there were other risks. "Argentina needs to reduce public spending. Issuing bonds like this is an easy way for public spending to get out of control," he said.

Argentina's inability to pull out of recession is putting pressure on its 10-year policy to peg the peso to the USdollar. Fearing a devaluation, Argentinians have been withdrawing their savings from banks.

Three weeks ago, Ignacio Osacar, a 50-year-old English teacher, moved his $US10,000 ($A18,700) to a bank safe. Others have moved their money to banks in Uruguay and some are keeping it at home.

About $US10 billion is believed to have been withdrawn from Argentina's banking system.

"We are really scared that our money in pesos will be worth nothing," Mr Osacar said.

Mr Fraga believes that even though the peso is overvalued, devaluation would be a disaster, as it would reintroduce inflation.

"The peso-dollar system was not chosen because it was a good system. It was the only system to stop hyperinflation," he said.

"If devaluation causes inflation, it cancels itself out. People prefer to continue with dollar convertibility."

Argentina used to be Latin America's most prosperous country. In the 1930s, it had more than a third of the continent's GDP. Now it has 12 per cent.

- GUARDIAN

This story was found at: http://www.theage.com.au/business/2001/08/24/FFX2NWHFPQC.html

-- Martin Thompson (mthom1927@aol.com), August 25, 2001

Answers

I don't see why they have to worry so much in Argentina. Alan Greenspan will rescue them.

-- Polly-Anna (polly-anna@ webster.net), August 26, 2001.