New ‘Plastic’ Money Causes Concern, Consternation
MANAGUA – Allegations that the new “plastic bills” recently put into circulation are “illegal” and “valueless” has caused confusion in Nicaragua’s economy and put the government on the defensive.
The Central Bank surprised the country May 15 by emitting a new series of 10 and 20 córdoba bills, made from an unfamiliar and highly resistant plastic-like material. The bills are to replace the old, ratty paper tender currently in circulation.
The new bills, which have a different design and size than the old paper bills, were released without benefit of any public-awareness campaign and came as a surprise to most people.
The resulting confusion in the marketplace grew more serious last week when several economists and opposition lawmakers argued that the new bills are actually “illegal” and should be recalled by the government.
Liberal Party lawmaker Wilfredo Navarro claims the bills are “fake” because they don’t carry the signature of the Minister of Finance, as required by the 1992 Monetary Law.
“These bills are illegal and worthless and should only be used to play monopoly,” Navarro told The Nica Times. “President Daniel Ortega is a counterfeiter. That’s the level things have gotten to in Nicaragua these days.”
Navarro insists that the money needs to be recalled and says those responsible for printing it could be charged with falsifying currency under the new Penal Code.
Sandinista lawmakers defend the new bills and have accused Navarro of “economic terrorism” for questioning the legality of the plastic tender. But others have echoed Navarro’s concern, casting further public doubt on the money’s tradability.
Opposition leader Eduardo Montealegre, a lawmaker and former Minister of Finance, agrees the new bills could be considered illegal.
“When I was Minister of Finance in 2002 and Mario Alonso was president of the Central Bank, it was a legal requirement for all new bills to have both signatures,” Montealegre said.
Indeed, Article 7 of the Monetary Law clearly states that all bills need to carry the printed “signatures of the President of the Central Bank and the Minister of Finance.”
The new bills only carry the signature of the Central Bank President President Antenor Rosales.
The Central Bank, however, insists the bills are legal and that it’s not important how many signatures appear on them.
“We have abided strictly by the Constitution and the law,” Rosales said, adding that it is the Central Bank’s directive council that decides how many signatures go on the bills, not the Monetary Law. “It could have been one signature, two or three.”
Rosales, a lawyer argues that the 1999 Organic Law of the Central Bank (Law 317), which gives the Central Bank “exclusive authority” to emit money, supersedes the Monetary Law of 1992, which requires the two signatures.
“So now we aren’t talking about the Monetary Law anymore,” Rosales concluded.
Others, however, have argued that the Monetary Law is still in effect and that the Central Bank’s “exclusive rights” to emit new money doesn’t give the state institution creative license to change established monetary design requirements.
Constitutional lawyer Alejandro Serrano said that both arguments can be made, but that the Central Bank is probably correct in its interpretation that Law 316 supersedes the Monetary Law. Though Serrano said he “can’t rule out” the argument that the bills are illegal, he said it would be a tough thing to prove in court.
Indeed, the situation is so confusing that even insiders seem unclear as to what the law says in this instance.
Former Central Bank President Mario Arana told The Nica Times this week that the way he understands the law is that it’s not necessary for both signatures to appear on new money, but that inclusion of the Finance Minister’s signature is long-held “tradition and a courtesy.” As a result, he said, the Central Bank always included both signatures on the bills while he was acting as the nation’s top banker, during the previous government of Enrique Bolaños.
But even Arana admits he’s unfamiliar with the specifics of the Monetary Law and would have to investigate the situation further to form a better opinion.
The problem in Nicaragua, according to Liberal Constitutional Party lawmaker Francisco Aguirre, is that most people don’t know what the laws say, including the government.
“In this country, we pass laws and we don’t know what they say and we don’t care,” he said. “This is an outlaw country.”
While economists, lawyers and politicians debate the legality of the new bills, on the street people’s reaction to the plastic money ranges from indifference to outright rejection.
Ironically, in a country that is normally obsessed with the condition of bills (people won’t accept U.S. dollars in anything less than perfect condition), now that the new plastic bills are crisp and clean, many consumers are opting for the sweaty old ones instead.
“What am I going to do, she won’t accept the new bills,” said pulperia owner Gloria Romero, as she counted out 30 coins to pay a fruit vendor who refused to accept the plastic ten and twenty.
“The coins are heavy, but at least they’re real,” the fruit vendor replied, hoisting the 40-pound basket back onto her head.
Romero admits that she, too, doesn’t want to hold onto the new bills, and tries to pass them off to others as quickly as possible. Her complaints draw nods of agreement from other women gathered in her store.
“Many people don’t want these bills because they think they are valueless,” said seamstress Fabiola Espinoza. She says many people remember the first Sandinista government’s inventive monetary policies and the resulting hyperinflation, and therefore don’t trust the new money.
“Again we have a Sandinista government and again they are changing the money,” Espinoza said.
The change continues next month, when the new 100-córdoba bills will be released, according to the Central Bank.
But the lack of information about the new bills has vexed many people. The Central Bank first announced the new tens and twenties at a press conference hours before releasing them into circulation, so most people had no idea how to react the first time they were handed the unfamiliar plastic bill.
“With all the money the government spends on billboards for Daniel Ortega, you think they could have maybe put up a few billboards announcing the new money. Then people might have known about it,” Espinoza said.
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