This article from NYTimes.com has been sent to you by [EMAIL PROTECTED] FYI my recent post. /-------------------- advertisement -----------------------\ Let NYTimes.com Come to You Sign up for one of our weekly e-mails and the news will come directly to you. YOUR MONEY brings you a wealth of analysis and information about personal investing. CIRCUITS plugs you into the latest on personal technology. TRAVEL DISPATCH offers you a jump on special travel deals and news. http://email.nytimes.com/email/email.jsp?eta5 \----------------------------------------------------------/ Argentina's Stopgap Cash Gets Some Funny Looks By LARRY ROHTER LA PLATA, Argentina, Aug. 24 — It looks like money, fits into a wallet like money, and the local government certainly hopes it will be accepted as money. But Ángel Díaz, a policeman here, had his doubts after being paid this week not with pesos, but with a new emergency currency called the "patacón," printed by the provincial government. "Well, the electricity company accepted the patacón," he said, "but the phone company wouldn't take them, the credit card company also said no, and the gas company said I can only pay 30 percent of my bill with them. The lack of confidence in this plan is obvious." Argentina may have secured an $8 billion credit line from the International Monetary Fund this week, but the country's finances continue to be chaotic. With the peso tied to the American dollar at a one-to-one rate and the Central Bank unable to print new pesos unless it has the dollars to back them, local governments like the one here find themselves squeezed to the point that they cannot meet their financial obligations. In a word, they are broke. "There is no other money to pay salaries, and there won't be for several months to come, because everything indicates that the crisis is going to deepen," Carlos Ruckauf, the governor of Buenos Aires Province, warned last week. "Those who don't want to take patacones are within their rights to go to court, but I don't have the pesos to pay them. Paying with patacones is a necessity, not a whim." The province of Buenos Aires surrounds the capital and is the most populous of Argentina's 23 provinces, with one-third of the country's 36 million people. In June, the provincial government tried to head off the looming cash crunch by floating a bond abroad, but that plan was derailed by the financial disorder enveloping the country. So this week the local government instead began paying its suppliers and 180,000 employees and retirees with what is formally called a "treasury letter in cancellation of obligations," a bond redeemable at 7 percent interest next year. Issued in denominations from one to 100 and officially valued at par with the dollar, the scrip was quickly renamed with a slang term, meaning something like wampum, used by a character in a comic book popular with generations of Argentines. Some businesses here, like McDonald's, have cautiously embraced the new currency. On Wednesday, the chain put up signs announcing "I believe in my country: I accept patacones" at its restaurants here and began offering a special "Patacombo," consisting of two cheeseburgers, medium fries and soft drink, for five patacones — but only if the customer has exact change. "We can't give change back in pesos, dollars or patacones," said Luis Sáenz, manager of a downtown branch. The Patacombo also costs a dollar more than a Big Mac combo, which some skeptics have cited as an example of local merchants hedging their bets by discounting the new currency. In general, businesses that sell basic goods feel they are forced to accept the patacón, despite their misgivings. "If our customers are only going to have patacones, then we are going to have to take them if we intend to stay in business," said Hugo Ríos, a supermarket manager. But high-end shops and boutiques, like those selling electronic goods and clothes, seem to have a different attitude. "I'm not going to accept paper that is of no use to me," scoffed Diana Lucki, owner of the Sonidos record store here. Diego Lozano, one of Ms. Lucki's suppliers, complained that the scrip cannot be negotiated in Buenos Aires, an hour's drive from here, and is not yet being accepted by any bank other than the province's. As he sees it, the patacón is a depressing symbol of the government's desperation and Argentina's decline. "We used to laugh at the Paraguayans with their guaranís and the Peruvians with their soles," he said. "But what is a patacón? It doesn't exist except in a comic strip. That we Argentines, with our arrogance, should be obligated to accept this ridiculous currency is ironic, a practical joke. No, it's worse than that: it's disgraceful." Resistance has been even more pronounced among the people who are to be paid in patacones. On Thursday, thousands of teachers and court and hospital workers demonstrated outside the provincial governor's palace, chanting "Give me pesos, give me, give me pesos," and carrying placards that bore slogans like, "Pay the foreign debt in patacones" and "Full and timely payment in pesos." "If someone wants to pay you with a photocopy of a dollar or a peso, would you accept it?" asked Rolando González, a sixth-grade teacher who was one of the protesters. "Of course not. The patacón isn't legal tender either, so we don't know if it has any value or not." Criminals, however, seem to have had no trouble in accepting the new currency at face value. On Wednesday, a court official was robbed of $7,000 worth of the bonds as he was transporting his department's payroll from the bank to his office. The emergence of the patacón is one more sign that the peso, nominally the country's legal currency, is being undermined. In the capital, unemployed people have begun selling their services and some goods in return for barter coupons, but the main threat is the American dollar, which has been fully convertible with the peso for more than a decade and has emerged as the preferred means of exchange. "In Argentina, we buy, sell and, if we can, save in dollars," said Martín Redrado, chief economist of Fundación Capital, an economic policy research group. "Almost all contracts are in dollars and 95 percent of the mortgage market is held in dollars. If people continue to lack confidence in the peso, the Central Bank will unfortunately be pushed to dollarize." But there are some here and in the United States who argue that dollarizing, or the replacing of the Argentine peso with the American dollar, is the best step to take. They see doing away with the peso as the only way to bring back an estimated $80 billion that has fled the country because of the economic crisis. "Argentines want a simple approach, and nothing is more coherent and simple than dollarization," said Miguel Díaz, director of the South America project at the Center for Strategic and International Studies in Washington. "And just imagine the appeal of investing in Argentina if you don't have to worry about the collapse of the peso." For the central government, though, the immediate risk is that it might lose control of economic policy. Nearly half of Argentina's provinces are now thinking of issuing bonds, according to local press reports, and that can only complicate the process of maintaining the "zero deficit" government spending program the central government has promised the I.M.F. The I.M.F. aid, meanwhile, is not expected to be much help to the provinces. "I'm not an economist, but I can tell what is going on," said Mr. Díaz, the police officer. "The problem is that everyone remembers previous government programs to stabilize the economy that were big failures, and so we are all afraid now. We lost a lot of money in those ill-conceived plans, and we don't want it ever to happen again." http://www.nytimes.com/2001/08/26/international/americas/26ARGE.html?ex=1000038927&ei=1&en=5aaddb4c6e712443 /-----------------------------------------------------------------\ Visit NYTimes.com for complete access to the most authoritative news coverage on the Web, updated throughout the day. Become a member today! 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