Spend 10 minutes inside any Peruvian bank branch and you’ll probably see several customers walk in or out with piles of cash and tellers everywhere counting 3″ stacks of bills. Most of the time the piles of cash will be Peruvian Nuevos Soles (PEN) but it’s not unusual to see customers carry $10,000 US either.

Some “up North” might think those Nuevos Soles are just “funny money” but the exchange rate of PEN to USD has been reasonably steady between 2.50 – 3.50 to 1 for at least 10 years now, so a fist full of cash is not a trivial amount, whether in USD or PEN.

Practically everything is done in cash here: pay rent, pay tuition, buy a car, buy a house, all in cash. The other day a lady at the teller window next to me was withdrawing S/.67,000 (~$20,000) in cash. A friend of ours used to work at an NGO that was supposed to help poor women in the country, part of her job was to take US$40,000 cash from the city of Cusco to various offices in small towns around Cusco every week. And yes, before you ask, she was supposed to travel in “combi” (public transportation) with no security.

This past weekend we were at an event with friends. One of our friends works for a multi-national bank with offices here in Cusco. He’d gotten permission to take the morning off from work – banks here are usually open Saturday until noon – but he was on the phone regularly with his office. Not that I was eavesdropping all the time but I did overhear one specific issue my friend was working on: one of his customers had called him and needed to withdraw US$100,000 in cash and my friend was trying to make sure the bank had that much paper money available in the office Saturday morning.

Cash is king here in Peru. Sorry if I’ve been fussing a lot lately about the elections and institutional weakness in Peru but how a supposedly investment grade economy can run largely on all cash – off the books – transactions is beyond me. At every election cycle the politicos talk about formalizing the informal economy but instead of worrying about taxing ice cream vendors they ought to be looking at the big picture.