Hyperinflation and the Reconstruction of a National Money: Argentina and Brazil, 1990-2002

Under high inflation, money experiences a process of institutional fragmentation: the unit of account and the unit of payment are split and transferred on alternate supports, either a foreign currency as for instance in Argentina, or domestic indices as in Brazil. Since the early 1970s', this alternate options have had far-ranging consequences on stabilisation strategies, on how monetary functions have then been re-integrated as on the overall quality of monetary regulation, i.a. for macroeconomic management. This paper compares the 1994 Brazilian Real Plan, which rebuilt a working, national monetary order, and the bimonetary Argentine Currency Board regime. After the 1999 devaluation in Brazil had demonstrated the resilience of the new money, un-pegging the Argentine peso caused a major dislocation in 2002. 'Pesification' is then analysed as an improvised attempt at rebuilding a single, national money. Surprising positive results were observed as regard the price mechanism for labour and goods. Conversely, 'pesification' of financial contracts (deposits, credits, bonds, etc.) proved a disaster : State intervention into private contracts, which was justified by the presence of a valuable public good - money -, opened the way for a large-scale, opaque redistribution of private wealth. This in turn raises the risks of a dangerous weakening of the interaction rules between private and public spheres.