Mexicans adjust to new bill that's costly to make but designed to last

The Dallas Morning News

By Brendan M. Case

Mexico City, 30.10.02

Talk about funny money. Mexicans are now paying with plastic, at least when they use the nation's newfangled 20-peso bills.

The next generation of twenties recently debuted, delighting some shoppers, bemusing others and making Mexico a regional leader in currency innovation.

The change? The powder blue bills, worth $2 apiece, are made of a kind of plastic and known as "polymer" currency. The notes are thin enough to fold into a wallet and durable enough to wash with a sponge.

"They're great," said Lilia Miranda Huitron, 22, an account executive at a Mexico City bank. "You can do whatever you want to them, and they don't get mistreated too badly."

Mexico became the first country in North America to experiment with plastic cash when it introduced the polymer bills last month. Proponents say such bills, an Australian innovation, will set the standard for 21st century currency notes.

The bills cost more to manufacture than plain old paper bills, but they're designed to last longer. In Mexico, where currency notes are regularly subjected to cruel and unusual punishment, authorities hope to get their money's worth.

"This bill, which is the smallest denomination, changes hands frequently," said Jaime Pacreu, the director of note issue at the Bank of Mexico, the central bank. "That causes a faster deterioration than in other denominations. Some countries that have had similar problems have solved them by printing their bills on polymer."

Americans with a yen to pay with polymer will have to venture south of the border. While the U.S. Treasury has conducted printing trials on polymer substrate, officials say they have no plans to replace traditional paper greenbacks, which are actually made of cotton and linen.

As the home of the almighty dollar, the world's favorite currency, the United States prints as many as 9 billion bills per year at plants in Washington and Fort Worth, Texas. That kind of volume, which is far higher than in Mexico or Australia, yields pricey printing costs.

"We have studied polymer substrates, but they cost a lot more than paper," said Claudia Dickens, a spokeswoman at the Treasury's Bureau of Engraving and Printing. "Also, most merchants can detect whether a bill is real just by the texture."

European Union officials also chose paper for the euro, the continent's new currency.

In Mexico, some people are still adjusting to bills that feel like a rather slippery form of scratch.

The notes retain the traditional portrait of Benito Juarez, the beloved 19th century president, but they sport several new features such as a small transparent window to discourage counterfeiters.

"They're good if you go to the beach, because you can get them wet and it doesn't matter," said Veronica Ponce, 30, a waitress in Puerto Penasco, a fishing port and resort town near the Arizona border. "Other than that, I don't see the point."

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Such skepticism has long irked Les Coventry, an Australian central banker and paladin of polymer. But now the plastic moneyman from the land down under feels he's winning the battle.

Plagued by short-lived paper bills, Australia introduced the world's first polymer notes in 1988 and adopted them systematically in the 1990s. The experiment worked.

Coventry, the head of note issue at the Reserve Bank of Australia, says polymer notes last four times longer than the country's old paper bills. The longer lifespan more than offsets the higher production cost. Moreover, adds Coventry, notes made of Australia's Guardian polymer substrate are harder to counterfeit. Producing them consumes less energy than producing paper bills, and polymer notes can be recycled after being removed from circulation.

"It is fair to say that polymer and paper substrates have their own advantages and disadvantages," Coventry said in a speech wryly titled "Polymer Notes and the Meaning of Life."

"But as we move into the 21st century, it is clear that Guardian polymer substrate will become the next generation substrate for bank notes."

Australia and New Zealand have torn up paper notes altogether and now use only polymer. Polymer notes also circulate in Bangladesh, Brazil and Brunei, not to mention Indonesia, Kuwait, Romania, Singapore and Thailand.

Coventry reckons that 10 percent of all note issuers have released a polymer bill. "And this trend shows no signs of abating," he said.

Mexico is the latest customer.

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Pacreu, the Bank of Mexico official, notes that the average 20-peso paper bill lasts about seven months before getting too decrepit to circulate. Australia's polymer notes typically stay in circulation at least two years.

"It has been estimated that the new bills cost 50 percent more than the previous bills," Pacreu said. "If the new bill's lifespan is at least three times as long, the total cost of producing bills for that period would be half the current cost."

Pacreu says polymer notes are sturdier and more hygienic, in contrast with paper notes that can become limp and grimy.

Polymer bills can even be scrubbed clean-although Finance Ministry officials note that recent reforms will make them harder to launder.

The new bills' heightened durability will not keep them from slipping through people's fingers, economists warn. They'll fail to solve a wealth of other woes, as well, particularly ingrained practices that are tough on defenseless bills.

Many companies still pay their workers in cash, stapling together wads of bills. Also, some wallet-less consumers keep track of their notes by stapling them together.

The Bank of Mexico has an image on its Web site discouraging consumers from stapling their bills, much as other federal agencies have images on their Web sites discouraging public officials from taking bribes.

Central bankers also seem to be worried about Mexicans burning through money-the bank's page recommends keeping bills away from fire.

Alas, polymer notes are just as easy to staple as paper ones, and informal studies show they melt near flame. (They're also just as effective as paper bills for paying bribes.)

Worse, the new notes will do nothing to alleviate merchants' chronic inability to provide change for larger bills, one of the great headaches of life in Mexico.

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The Bank of Mexico plans to use polymer notes only to replace the existing supply of 20-peso paper bills. It's not planning any significant boost in the supply of hefty 20-peso coins, either.

Still, the central bank's experiment with polymer bills could blaze a trail in currency management with long-term consequences for millions of Mexicans, not to mention Americans visiting on business or pleasure.

Polymer bills eventually could work their way into denominations of 50 pesos, 100 pesos, 200 pesos and 500 pesos.

But only if they win over skeptics like Miguel Vazquez Mejia, 22, a college student in Mexico City who scoops ice cream part time.

"The new bills are very fragile," he said. "As time goes by, they're going to deteriorate."