CASH-STRAPPED ARGENTINES BEGIN YEAR ON A TENSE NOTE / THE WALL STREET JOURNAL ( RECOMMENDED READING )

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JANUARY 10, 2011, 3:50 A.M. ET.

Cash-Strapped Argentines Begin Year on a Tense Note .

By MATT MOFFETT

BUENOS AIRES— Argentines are starting the new year facing a cash crunch—literally, a shortage of bills at banks and automated-teller machines due to what critics say is faulty planning at the central bank, as well as persistent inflation.


The scarcity of cash has hamstrung vacationers during the Southern Hemisphere summer, compelled customers of at least one bank to line up overnight to get money and prompted some financial institutions to cap withdrawals.


The government of President Cristina Kirchner has promised a quick resolution, saying fresh peso notes are being flown in from a currency engraver in Brazil to augment those produced by the overwhelmed local money printer.


But Argentine Central Bank President Mercedes Marco del Pont, who took office last year, is coming under political fire for being unprepared for the predictably high seasonal demand for cash, due to Christmas bonuses and pension payouts.


A more fundamental problem, critics say, is President Kirchner's eagerness to sweep the country's inflation problem under the rug by refusing to print notes in denominations larger than 100 pesos.


Private economists say inflation is running at about 25% a year, one of the highest rates in the world and more than twice the widely discredited official rate. Meanwhile, Argentina's peso has depreciated to about four per dollar from one-to-one since 2001, but the central bank has maintained the 100-peso note as its largest bill the whole time. The upshot is it takes more and more bank notes to buy the same amount of goods.


The cash squeeze emerged at the end of December and has worsened. "I don't even know how I'll pay my cab," complained office worker Natalia Arias, as she encountered a sign saying no cash was available at a Citibank ATM in downtown Buenos Aires on Friday.


Government workers in some localities haven't been able to access salaries that had been deposited at state-run banks. Over the weekend, in beach resorts like Mar del Plata and Pinamar, lines outside those ATMs that had cash often stretched longer than those at some popular restaurants and clubs.


Argentina is no stranger to panics and crises, but the current cash squeeze comes at a time when the economic picture is looking fairly bright, by Argentine standards. The economy is projected to grow by more than 5% in 2011 and the central bank is sitting on an ample cache of $52 billion in hard-currency reserves.


The big problem is inflation and the government's unwillingness to acknowledge it, analysts say. The crunch is the result of "corrosive effect of inflation" and "the lie of a government that takes people for imbeciles," said Alfonso Prat-Gay, a former central bank president who is a congressman for the opposition Civic Coalition. In an interview with Radio El Mundo, Mr. Prat-Gay said that during his term at the bank, from 2002 to 2004, there were plans to print notes of 200 and 500 pesos, but that they never got off the drawing board.


Mr. Prat-Gay said the Kirchner government is "thinking that, 'Well, if we introduce a larger bill, people are going to be aware that there is inflation,' as though they didn't know already." He said 100-peso bills account for 90% of the currency in circulation.


Some Congress members are calling for the head of Ms. Marco del Pont, the central bank president. But cabinet chief Anibal Fernandez rushed to her defense, saying that "the Central Bank took the necessary measures and is now supplying all the places." Ms. Marco del Pont couldn't be reached for comment.


Argentines are waiting for the situation to be normalized, however.


"More bills need to be produced and this hasn't been done in a timely fashion," said Claudio Girardi, a leader of the bank workers' union in the province of Santa Fe.


There has also been a worsening in the shortage of coins, a problem of longer standing in Argentina. Change was so hard to come by last week that conductors on some Buenos Aires train lines allowed passengers to ride for free.


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