Photo via La Voz

The notion of paying rent in cash, though common practice in Argentina, is relatively unheard of in many other countries. And while the AFIP tax collecting agency is now encouraging customers to report businesses for not accepting credit cards, we remain a heavily cash-based economy. So much so, indeed, that Argentina now has the greatest number of bank notes in circulation out of all of its neighboring countries, according to a report by IDESA, (the Institute for Social Development in Argentina).

Floating around the Argentine plains, alongside some beautiful landscapes and a whole lot of dulce de leche, there is around US$ 734 worth of notes per inhabitant. To put this into perspective, the figure for Chile and Uruguay is just above US$ 500, and US$ 463 in Bolivia, while in Brazil and Paraguay, you’re looking at less than US$ 260 per person.

Admittedly, this isn’t the most useful of comparisons as the cost of living is much higher in Argentina than, for instance, Paraguay, and so a hiked amount of cash per person is somewhat predictable. Nonetheless, the informality of Argentina’s economy is still rather undeniable.

Many estimates stipulate that around a third of both transactions and jobs are paid for in cash. Just 50 percent of Argentines have a bank account, compared to 63 percent in Chile, 68% in Brazil and around 85 to 90% in more developed countries. All of this amounts to an excessive dependence on cash, and too many darn bank notes. As well as the impracticality of carrying around wads of money when rent day comes around, and the rush to the ATMs before bank strikes and weekends in order to stock up on physical money, this cash-based culture brings with it other negative consequences.

7 out of every 10 of these notes are damaged, say the Central Bank, which makes it easier to circulate counterfeit notes. This in turn, complicates matters for business each time a customer tries to pay with a damaged note. The sheer quantity of bank notes is also putting a strain on the available space in bank branches, which is just one motive behind the Central Banks effort to shift to phase out note denominations of under 20 pesos and move towards more durable, and less costly, coinage. In theory, though it is rarely carried out in practice, broken notes should be taken to a branch of the National Bank to be exchanged for better quality notes of the same value. These have to be sent to the headquarters of the Central Bank in Monte Caseros, and all this transporting around is pretty pricey.

So why oh why, if its so unstable and costly, and when cards are safer and more practical, do we insist on operating in physical currency? Firstly, according to Martín Tetaz, Behavioural Economics expert, it can be put down to a “cultural barrier.” Rationality and current international trends aside, we just like to stick to what we are used to. It also can’t start to change just from the customer alone; if employees are being paid in cash and therefore have no need of a bank account, they can’t just make the switch to credit or debit. High rates of tax for formal businesses and employees also provide an incentive to companies to deal in cash In fact, many business even offer discounts to those who pay in cash, as it is cheaper for them to do so.

But in order to make the transition to using cards more often, as has caught on in Brazil and Chile for instance, we need to recognize that this cutting corners in terms of costs is only beneficial in the sort term. It may be cheaper in the immediate present to opt for cash over card, but slowly and surely it becomes “much more costly for everyone to deal in cash,” affirms Tetaz; it can force taxes to be increased even more, and the extra costs may even contribute to inflation. Enormous costs are involved in printing more and more notes, transporting them, keeping them in banks, and destroying the old ones.

So while we hold our bank notes close to our hearts — the Jaguar-emblazoned 500 bill was nominated the prettiest in the world — it may be time to leave the cash behind…