Background and Context
Argentina’s government announced a plan on Thursday to relax regulations that would allow citizens to use their dollar savings without explaining the origin of these funds. This move aims to attract undeclared currency held by Argentinians.
For years, many Argentinians have distrusted banks due to recurring economic crises. As a result, they’ve resorted to saving in dollars outside the formal banking system—under mattresses, in safes, or in foreign accounts. Official estimates suggest that undeclared savings amount to at least $20 billion.
According to Economy Minister Luis Caputo, high tax pressure and stringent reporting regulations imposed by the state have driven around 50% of Argentina’s economy into informality.
Government Measures
Caputo stated that these changes aim to “return freedom to people” and dispel the notion that those who sought refuge in the informal market are criminals.
The new measures will also raise reporting thresholds for certain consumption or transactions to the Customs Revenue and Control Agency (ARCA), including credit and debit card expenses, electronic wallets, public utility consumption, car purchases, and property sales.
International Oversight
The International Monetary Fund (IMF) emphasized that any Argentine measures promoting undeclared assets must comply with international anti-money laundering schemes, including those in their ongoing $20 billion program with the country.
Market Reaction
Argentina’s financial market welcomed the government’s announcement. The Buenos Aires stock exchange gained 1.4% in the leading S&P Merval index by 3:30 PM GMT after opening lower.
Presidential Decree and Future Legislation
Presidential spokesperson Manuel Adorni announced that President Javier Milei, known for his liberal policies, will sign the decree titled “Plan of Historical Reparation for Argentinians’ Savings” and send a bill to Congress to ensure future certainty for savers.
Key Questions and Answers
- What is the main goal of Argentina’s new plan? The primary objective is to allow citizens to use their undeclared dollar savings without needing to explain the origin of these funds, thereby attracting hidden currency.
- Why are many Argentinians saving in undeclared dollars? Due to a history of economic crises and distrust in the banking system, many Argentinians have resorted to saving dollars outside the formal financial sector.
- What percentage of Argentina’s economy operates in informality? Around 50% of Argentina’s economy functions in the informal sector, according to Economy Minister Luis Caputo.
- What measures will the Argentine government implement to encourage formalization? The government plans to raise reporting thresholds for certain transactions and simplify regulations surrounding undeclared savings.
- How will the IMF ensure Argentina’s measures comply with international anti-money laundering standards? The IMF will monitor Argentina’s progress and ensure that any new measures align with international anti-money laundering schemes.
