(Eng Trans) Re: (Spa) Cavallo's currency board already broken by reality

["Lou Paulsen" <wwchi@xxxxxxxxxxxx>]

Partial English translation

-----Original Message-----
From: Gorojovsky <Gorojovsky@xxxxxxxxxxxx>

Subject: (Spa) Cavallo's currency board already broken by reality


>A pity Henry Liu does not read Spanish
>------- Forwarded message follows -------


This article seemed important enough to try to translate, but it sort of
stretches my knowledge both of "business Spanish" and of Argentine economic
life.  My comments and questions are in braces [thus].

(Nestor's summary:)

The country has decided, whether Cavallo wants it or not, to leave
interconvertibility of currency behind.  That's the only possible
implication of the proliferation of "bonos" [scrip? vouchers?  Which term
would be better?  "Scrip" is more like a medium of exchange, while "voucher"
emphasizes the relationship with the particular underlying commodity] in
Buenos Aires province (and which are already starting to be accepted in the
Federal Capital).  [I believe the "province" is the industrialized area
around the commercial/financial center, and the "Capital" is the financial
center itself?]  Now, a new step: the creation of "bank checks" denominated
in "bonos", with all the implications for the generation of credit.  In
reality, the "patacón" [my dictionary translates this as "dollar", but I
gather this is a slang term, perhaps equivalent to "buck" in U.S. English?]
(the horrible name used for the "bono" in Buenos Aires province) can develop
into the embryonic form of a non-convertible currency, which is just what
Argentina needs.   [The point being that the official currency is
convertible into U.S. dollars at a fixed rate of exchange.]  Whenever one
has a dollar in one's hand, one becomes captive to it.

[Who is issuing these "bonos"?  (I have the impression that many businesses
are issuing them)  And what are they redeemable for, if anything?  (I
suppose, at present, for the businesses' own commodities, but the idea here,
it seems, is to convert them into a generalized medium of exchange.)]

(Article)

PROPOSE CLEARING HOUSE FOR "BONO" CHECKS

LA PLATA, October 24 (Agencia NOVA) The commercial centers and industry
committees headquartered en the Business Federation of La Plata (FELP) held
a meeting with officers of the Municipal Bank of this city, which agreed on
the necessity of creating a clearing house for cheques denominated in
"patacones", incorporating the system into the Bank of Buenos Aires
Province.

The enterprise directors indicated that it was indispensible to have a
clearing house for checks and money orders in patacones because "they can
only be redeemed over the counter [by the issuer?] and this is bad for the
businesses."

The officers of the Federation explained that "the issue was raised with the
managers of the provincial Bank, who have started to work on the proposal,
and we hope to see a solution in the near future."

In addition, the FELP commented that the Municipal Bank has already created
checking accounts (? cuentas corrientes) in "patacones" (called repositories
of value), and is considering an "operatoria" (?? a department? facility?)
for such "bonos" for small and medium-sized businesses.  [Does this mean
that the bank would issue the "bonos" on behalf of the business, rather than
the businesses issuing the "bonos" themselves?]

-------------------------

I'm sure Nestor will fix up any errors I made here.  Now a question or two
(or three) of my own.

(1) If I understand what is happening correctly, the businesses are issuing
the "bonos" to pay their workers, and maybe also suppliers (?), because they
don't have dollars (using the term 'dollars' for the official currency which
is interconvertible with US dollars) and can't borrow them because, in
effect, the imperialists have all the dollars and won't loan them out on
reasonable terms.  The "bonos" are then backed up by the goods and services
to be produced by the business.  What does this really mean?  Does the
worker at the bakery have a pocket full of "bakery bonos", and what can he
do with them?  Can he buy clothing with "bakery bonos", or does he have to
redeem the bonos for bread and then try and trade bread for clothes?  If he
can buy clothing with bakery bonos, does the clothing store at the end of
the day have a large pile of bonos issued by bakers, manufacturers, trucking
firms, etc.?  I suppose this would indicate the need for the clearing house.

(2) If there are "bakery bonos", what do they say on them?  Do they say
"This bono can be redeemed for 10 loaves of bread", or do they say "This
bono can be redeemed for bread in the value of 10 dollars"?  If they say "10
dollars", then isn't the value of the bono also determined by the value of
the US dollar?  And if they say "10 loaves", how can the clearinghouse
determine the relationship between "bakery bonos" and "clothing bonos"
without referring to the price in dollars of bread and clothing?

(3) If the situation develops, how will this be different from a "two-tier"
economy, like in the USSR in the 1980's, where there is a "dollar economy"
for anything involving imported goods, and a "bono (ruble) economy" for
domestically produced goods?  Won't there also be a floating exchange rate
between dollars and bonos, with the imperialists trying to buy up bonos for
the lowest possible price in dollars?  Or is the answer to this "Yes, it
would be like that, but that would be better than what we have now"?

It's entirely impossible that I have completely misunderstood the situation,
too.  Nestor? :-)

Lou Paulsen


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