Galeria Pacifico, Buenos Aires

Argentina’s Coin Scarcity Leads to Illicit Numismatic Trade

November 21, 2008 10:58 AM
by Anne Szustek
A shortage in coin circulation in Buenos Aires has left shopkeepers desperate. Some demand exact change, some pay change in candy, and others turn to the black market.

Buenos Aires: Where Quarters Could Be Worth More than Dollars

In Argentina’s capital, Buenos Aires, the sort of money that jingles carries more weight than the sort that folds. A severe shortage of coins, allegedly at the hands of black market traders who amass large amounts of coins to sell them to small business owners for a profit, has led shopkeepers to go such extremes as offering inexpensive goods such as candy or mints in place of change. Larger stores simply round off bills in their own favor.

“The problem is that the banks, bus companies and toll companies that soak up most of the loose change in circulation have discovered that reselling the coins is a tremendously lucrative business with a profit margin of up to 8% tax free, because it is an illegal trade on the black market,” Miguel Calvette told Time magazine. Calvette is a spokesperson for the Association of Chinese Supermarket Owners, which is speaking out against the alleged coin racket on behalf of some 4,000 shops run by Chinese natives in Argentina.

Argentina’s Central Bank, which has begun minting coins in record numbers to alleviate the coin shortage, is pinning the blame on bus companies and money transporters. A raid last month on money-transporting company Maco garnered the Central Bank 13 million coins, which was returned to Maco in bills.

Maco, which distributes coins to larger stores and to Metrovias, the subway company, claims no wrongdoing. Maco director Fernando Der told Time that its work sorting and shrink-wrapping coins “has a production cost and we charge for the service.”

One day in October, Metrovias had to let passengers ride free after it couldn’t procure enough change for those paying fares in cash. The Buenos Aires subway company now sources 70 percent of its coins from Maco “because the Central Bank was providing us with only 10% of our daily coin requirement,” a spokesperson for Metrovias was quoted as saying by Time.

Some Argentines suspect that another reason for the shortage is that people are collecting coins to have them melted down and sold as copper for more than their original face value.

Despite stipulations from the Central Bank and customer complaint hotlines, banks routinely refuse to change up to 20 pesos, or six dollars, per person.

It’s at the point where Buenos Aires housewife Laura Daniel has “to hold her purse steady when shopping, because if the shop owner hears coins clinking inside, he’s going to demand I pay with them,” she told Time. “And it could get nasty, because I need the loose change for the bus.”

Background: The real price of coins

Echoing similar concerns about the price of copper as well as nickel, last spring the U.S. House of Representatives issued a bill that would make steel the principal metal in coins to bring the value of pennies and nickels back down to their face value. Producing a penny cost 1.26 cents as of May 6, 2008; creating a nickel ran higher than 7.5 cents.

Spurred on in part by the lucrative prices of metal, last year some parts of India were seeing shortages in small-denomination coins at the hands of hoarders who melted down currency and smuggled the metal to Bangladesh, where it were made into razor blades that fetched much more on the market than the face value of the coin.

“Our one rupee coin is in fact worth 35 rupees, because we make five to seven blades out of them,” a grocer apparently involved in such a smuggling ring was quoted as saying by the police. “Bangladeshi smugglers take delivery of the blades at regular intervals.”

Some tea gardens in India’s northeastern state of Assam resorted to issuing homemade currency in the form of cardboard slips to be used on premises. An owner of one of these gardens told The BBC, “We will commit an offence if these cardboard slips go out, but we have to use them in our gardens because there are hardly any Indian coins in circulation here.”

Related Topics: Coin hoarding around the world

Coin shortage or not, in some countries shopkeepers leave the onus on the customer to provide change. In Italy and Turkey, for example, many shopkeepers categorically refuse to break large bills out of sheer reluctance to part with small change.

“Back home in Chicago, if I go into a Starbucks, I don’t give it a second thought if I give the cashier a twenty dollar bill for a $2.50 purchase. They always have plenty of change. Here, even in some supermarket chains, the cashiers constantly ask for exact change or at least for notes in smaller denominations,” Thomas Kaminski, an American expatriate living in Italy, writes on blog Marginal Revolution. “What is equally annoying, whenever I go to a cash machine, all I get are 50-Euro notes.”

Similar calls for change are heard throughout the former Soviet Union, where shopkeepers, if not outright refusing to break large bills, replace small change with the equivalent in items like matchbooks or gum. The author of blog KZ, an expatriate living in Kazakhstan’s capital Astana, writes that “very often if you are buying something for 67 tenge and you give them 100 tenge, they hand you, not your 33 tenge change, but 30 tenge and a book of matches. It’s really cool if you have a gas stove, because you need the matches anyway. And a box of matches often costs more than the change.”

In the years immediately following the dissolution of the Soviet Union, many pay phones were still operating on kopeck coins, even though the calls themselves were priced much higher. Would-be callers would have to go buy “tokens”—in actuality, old kopeck coins—to be able to operate the phones. A poster on Marginal Revolution muses that while he was at a conference in Moscow in 1992, his “wife wanted to call somebody, and had to give three roubles to obtain two kopeks to make the call. That would be like paying three dollars to get two pennies in the US.”

Most Recent Beyond The Headlines