Argentina Is Printing Cash by the Truckload

  • Money in circulation rises 10% amid inflation estimated at 35%
  • Armored truck companies Brink's and Prosegur are benefiting

Inflation is rampant. Growth is stagnant. And companies are stranded with mountains of cash they can’t get out of the country. It’s a mix that makes Argentina more likely to be a blight on corporate income statements than a boon. But one class of company isn’t complaining: armored truck operators.

Brink’s Co. and Prosegur Cia. de Seguridad SA, the biggest providers of the vehicles in Argentina, both cited gains during third-quarter earnings calls. It’s a rare bright spot in a nation that has been singled out for its inflation that erodes sales and capital controls that limit foreign money transfers.

Those same forces are helping Prosegur and Brink’s. The Argentine Treasury’s printing presses have been working overtime, boosting currency in circulation by 10 percent this year to 900 billion pesos ($94 billion) as of late October, according to the central bank. That’s fueling inflation of as much as 35 percent a year, said Jeffrey Kessler, an analyst at Imperial Capital LLC. It’s also boosting demand for armored trucks to move the cash around, the companies have said.

“The business is growing on its own,” Kessler said from New York about Brink’s. “Then you lop on top of that -- like the ice cream on top -- the amount of currency increase. They’re benefiting.”

Low Reserves

With central bank reserves at their lowest in nine years, the net amount of pesos printed to fill Argentina’s budget deficit is near 40 percent of the nation’s money supply, the most in at least a decade, according to estimates from Citigroup Inc. The country’s largest bill is now worth about $10 at the official exchange rate, helping to boost the number of notes in circulation.

Brink’s, based in Richmond, Virginia, gets about 40 percent of its revenue from Latin America. It said at the end of last month that the value of sales in pesos grew as much as 60 percent from a year earlier, while Madrid-based Prosegur also cited increasing revenue in Argentina.

“The recent growth in Argentina is primarily inflation-driven, though we are also seeing volume increases related to the additional pesos in circulation,” Edward Cunningham, vice president of investor relations at Brink’s, said in an e-mailed response to questions. Prosegur declined to comment.

Brink’s shares slipped 0.6 percent to $31.06 as of 10:55 a.m. in New York. Prosegur fell 1 percent to 3.94 euros in Madrid.

Upcoming Election

Their good fortune isn’t likely to last. Like all foreign companies operating in Argentina, Brink’s and Prosegur can expect to take a hit from a looming peso devaluation that analysts from Citigroup to Credit Suisse Group AG say is coming, regardless of who wins the Nov. 22 presidential elections.

A top adviser to Mauricio Macri, the opposition candidate, says he will make it a priority to fight inflation that he believes is being driven by printing more and more money. The candidate for the ruling party, Daniel Scioli, is expected also to remove currency controls but more gradually.

“There’s more than likely to be a devaluation some time in 2016,” Kessler said. Brink’s has "warned everybody about that -- not to expect this type of gain again.”

For now, the printing presses are running on high and the capital controls are staying put. While that will continue to drive demand for the truck companies’ services, it also leaves Brink’s and Prosegur facing a situation like that of their clients: Money made in Argentina must stay in Argentina. No word on whether they’re using their own armored vehicles to move the cash around.

Before it's here, it's on the Bloomberg Terminal.