For those who use cash, it is becoming a real headache to make daily payments, where the highest denomination bill in Argentina is no longer enough to even pay for a lunch, a parking lot, or a kilo of meat. . For what is installed again in the market the need for the government to issue new higher securities.
With the inflationary escalation in recent months this problem has increasedbecause the purchasing power of pesos is decreasing. And from the Central Bank there is also no genuine interest in launching new denominations, because it is said in a low voice that the objective of the authorities is to increasingly reduce the use of cash, to discourage transactions within the economy. informal.
Of course, this situation creates a big problem for the economy, because the ATMs are not enough to deliver the money requested by users, and in addition “bottlenecks” are formed in the logistics of businesses and entities that collect cash, because they must store, order and send to banks an increasingly high amount of money.
Thus, The volume of $1,000 bills circulating between the public and banking entities is increasing more and more. According to calculations by iProfesional, based on figures from the BCRA, throughout 2022 the number of current papers with the highest denomination grew by 34%. In other words, some 568.6 million more units were issued this year. And, in total, there are already some 2,236.5 million copies with the image of the baker on the street.
Pesos that are worth less: how the purchasing power of $1,000 fell
The concrete thing is that the purchasing power of the banknote with the highest denomination that the domestic economy has, from its put into circulation in December 2017is decreasing, given the high rises in domestic prices.
“Since the $1,000 was born less than 5 years ago, inflation has averaged 52% per year, taking away by leaps and bounds its purchasing power until it is currently reduced to less than 15% of what it had at the time of its launch”sentence to iProfessional Andres Mendezdirector of AMF Economy.
The purchasing power of the $1,000 bill will have fallen 90% in December, compared to what it had in December 2017, when it was launched by the BCRA.
In fact, the loss of the purchase capacity of the baker’s ticket was very great as soon as it was launched onto the street, because in December 2019, when celebrating its second year, it had resigned 56% of its power. And a year ago that percentage had been reduced to 76%..
In summary, a $1,000 bill today is equivalent to $150 compared to the purchasing power that this paper had almost 5 years ago, when it was launched.
“With the expected dynamics in terms of the increase in prices of goods and services, it can be estimated that when it arrives in december coming up on the fifth anniversary of its entry into force, its purchasing capacity will barely border 10% of the amount of goods and services that could be accessed in December 2017. In other words, reversing these results, the banknote is heading towards a dubious privilege: having lost almost 90% of its value since it began to circulate,” Méndez summarizes to iProfesional.
New figure for the highest denomination bill
Therefore, that $1,000 bill that appeared less than five years ago is headed for require a natural replacement that “multiplies by 10 its written value”, warns this analyst.
“Specifically, it can be traced, on the one hand, an evolution of the hypothetical value that the banknote should have had in each month to have a purchasing power equivalent to that of its entry into circulation. In this case, in September this valuation will be above $7,500″Mendez details.
This means that a “$7,654” bill should be printed today to match the value of the $1,000 bill when it was put into circulation on the street.
To equate the purchase value that the $1,000 bill had 5 years ago, today that maximum paper should be worth about $7,654.
In round numbers, it would be necessary to think of a $10,000 bill to, at least, have an equivalent to the value that the current maximum unit had when it was launched in December 2017.
In fact, based on inflation forecasts for the coming months, for a $1,000 bond to be worth the same as when it was first issued 5 years ago, it would need in December that comes have a value of $ 9,000.
“And in the first quarter of 2023, more precisely next February, it will be necessary to have a $10,000 bill to acquire a basket of goods and services equivalent to what was accessed in December 2017 with a $1,000 bill,” says Méndez.
So, if these price rise forecasts for the coming months are confirmed, by averaging the first quarter of 2023, 10 banknotes of the current maximum denomination will be necessary to acquire a basket equivalent to the one that was accessed 5 years ago with a single baker.
“Put another way, in 5 months, the $1,000 bill will have similar purchasing power to the diminished one exhibited by the $100 bill in December 2017“, concludes Méndez to iProfessional.