Monopoly money gives you credit in the land of the bourgeois poor

Amalia is dressed elegantly, wearing green-tinted glasses and wrapped in a luscious paisley scarf. She looks exactly as you would expect for an upper middle-class Porteno, the name given to the residents of Buenos Aires. The Portenos have a reputation as Latin America's most glamorous, sophisticated citizens.

Except that Amalia, 65, is just keeping up appearances. She is penniless.

Amalia has come to a "barter club". She brought a piece of home-made knitwear which she is trying to exchange for some barter credits. These credits - that look like Monopoly money - can be used in exchange for food, clothes or even haircuts. Amalia uses barter club currency to make ends meet.

"My husband used to have a shoe factory with 100 workers. We had two retail outlets. But we couldn't compete with cheap Brazilian shoes. Now we have nothing," she says. "If it wasn't for the credits I don't know how I'd survive."

The growth of barter clubs, which started in 1995 and now involve about a million Argentines, is a reflection of the country's deep economic crisis.

The three-year-old recession is the worst since the 1930s and unemployment has reached historic highs. On Tuesday an alternative currency was introduced. More than 150,000 state employees in the province of Buenos Aires - which contains 38% of the country's population - were paid part of their salaries in one-year bonds called patacones.

The bonds, which look like bank notes, are already in the provincial bank's cash machines. Supermarkets and other outlets - including McDonald's - have said they will accept patacones and use them to pay state taxes.

Buenos Aires province was forced into issuing the bonds because it did not have enough cash to pay salaries.

Bond bonanza


"Argentina has lost almost 30% of its currency reserves since March. The provinces are already feeling the effects. It is in this context that they are printing the patacones," said Rosendo Fraga, who runs a leading political think-tank.

He added that printing money like this would not create inflation, but there were other serious risks: "Argentina needs to reduce public spending. Issuing bonds like this is an easy way for public spending to get out of control."

Argentina's inability to pull out of recession is putting pressure on its 10-year-old policy that has the peso pegged to the US dollar. Fearing a devaluation, Argentines have been withdrawing their savings from banks.

Three weeks ago Ignacio Osacar, a 50-year-old English teacher, took his $10,000 savings and transferred them to a bank safe. Many people have taken their money to banks in Uruguay and some are keeping it in their homes. In all, about $10bn is thought to have been withdrawn from the Argentine banking system.

Mr Osacar said: "I felt I didn't have an option. We are really scared that our money in pesos will be worth nothing."

Mr Fraga believes that even though the peso is overvalued, devaluation would be a disaster for Argentina since it would re-introduce inflation. "The peso-dollar system was not chosen because it was a good system. It was the only system to stop hyperinflation. If devaluation causes inflation it cancels itself out. People prefer to continue with dollar convertibility."

Argentina used to be Latin America's most prosperous country. Its economic decline has stretched over 70 years. In the 1930s it had more than a third of the continent's GDP. Now it has only 12%.

Constantino Menelle's parents migrated to Buenos Aires from Italy after the first world war. They came to a land that symbolised hope and offered the prospect of building a new future.

Now, the Menelle family wants to go back, "for these three reasons: no money, no money and no money," he said, standing in the visa queue outside the Italian consulate. "This is the most beautiful city in South America, but the people have changed. You don't go out at night because you are afraid of the violence.

"Everyone has a complete insecurity about whether they will receive their salary. With all these cuts, for all I know the government might cut my pension."

Mr Menelle, 62, added: "I blame the politicians. Every country has corrupt politicians, but then good ones come along. Here they are always the same."

In order to protect the peso, the government of Fernando de la Rua has been slashing state spending, which has created visible social unrest.

My taxi driver barely registered frustration on Tuesday when we had to take a time-consuming diversion because the Engineering University was holding its lessons in one of Buenos Aires' main avenues. The protest was about education cuts.

Near the Plaza de Mayo, Marta Bongiorno, 33, was standing in a line of about 300 women that ran round the block. They were answering a newspaper advert for a single job. "I was made redundant five months ago," she said. "It was the first time I hadn't worked all my adult life. The crisis is everywhere."

An estimated 11m Argentines are now living below the poverty line. Graciela Romer, a political consultant, said this is difficult to stomach because the country used to have a large middle class.

"Argentina was different from most of the other countries in Latin America. The new phenomenon is the impoverishment of the middle classes. We are in a process of Latin American-ization."

Ms Romer believes that since the military dictatorship ended in 1983, the governments invested in the wrong areas. "The modernisation of the economy did not concentrate money in industry and small and medium businesses, which generate the most jobs.

"We have been turned into a country that is basically an agricultural exporter. This has changed the social structure of the country very deeply. For generations people have thought that education gets you a better quality of life. It's not like that any more. Education is no longer a path to a job."

She added that the crisis has had serious psychological effects: 70% of the population are afraid of losing their jobs. "There is a climate of uncertainty about the future that increases delinquency, violence and suicide. When you talk to doctors at hospitals they have seen an increase in depression and drug addiction. When things got bad in the past before we were relatively optimistic. Now the real problem is that there is no light at the end of the tunnel."

Argentina's large middle class has been responsible for the unprecedented growth in barter clubs. The idea of creating community credits to trade products or services first emerged in Canada in the early 1980s but has only caught on as a mass phenomenon in Argentina.

Heloisa Primavera, a professor at the University of Buenos Aires, said: "Barter clubs only work if people are bartering lots of different services.

"It doesn't work if everyone is just selling potatoes. Argentina has a large class of professional people who are in financial difficulties. In other countries with a large middle class there is not the same necessity."

People start going to barter clubs because they have no money to buy what they need in the open market. They bring clothes or food, or offer services.

Argentina has about 1,200 such clubs, which are frequented by every profession imaginable, including dentists, lawyers, tattoo artists and yoga teachers.

At the table next to Amalia was Sergio Estadios. An unemployed journalist, he was exchanging leather belts and shoes that he had earned as payment for some PR work.

"Only through the barter clubs can I get enough food for my children," he said.