BUENOS AIRES, Argentina — Argentina’s government on Thursday unveiled an ambitious scheme to bring billions of undeclared U.S. dollars tucked under mattresses or stashed in foreign bank accounts back into the crisis-prone country, as libertarian President Javier Milei seeks to boost Argentina’s low international currency reserves and stimulate the limping economy.
By eliminating tax reporting requirements, the plan invites savers – who long have swapped their depreciating pesos for American currency in the country’s underground market – to spend unreported dollars on everyday transactions at home. The government won’t ask questions regarding the source of the repatriated funds, officials promised.
“Your dollars, your decision. What’s yours is yours, not the state’s,” Milei’s presidential spokesperson, Manuel Adorni, said in a press conference announcing the policies. “You can use them however you want, without having to prove where you got them from.”
Milei – who ran on a controversial campaign pledge to “dollarize” Argentina’s troubled economy – wants a new gush of greenbacks to boost the volume of U.S. dollars in circulation.
Although Argentina’s depleted currency reserves sent Milei backpedaling from his initial campaign trail-fervor for “burning down” the central bank and adopting the U.S. dollar as the national currency, these latest measures seek to hasten the country’s transition to a new currency system that would see dollars gradually replacing pesos.
Milei’s “endogenous dollarization” scheme would involve fixing the supply of the local currency even as Argentines could use dollars or pesos. He hopes this would encourage Argentines to use their dollar-denominated savings to buy houses and cars as the economy grows and more cash is needed in circulation.
To lay the groundwork, Milei’s government last year imposed a generous tax amnesty for Argentines willing to repatriate capital. In April, it lifted most currency controls as part of a $20 billion bail-out deal with the International Monetary Fund, which conditions its support on the government boosting its scarce foreign reserves.
“You can spend those dollars without anyone bothering you. So, you go, you want to buy, I don’t know, a house for $200,000, no one has to ask you anything,” Milei told the TV channel of Argentine newspaper La Nacion in an interview Monday.
Over decades of financial turmoil, Argentines have come to depend on U.S. dollars to evade a byzantine system of currency controls, hedge against hyperinflation and protect their nest eggs from government freezes, as has happened several times in the country’s recent history, such as during the catastrophic 2001 foreign-debt default.
“This is how we reached a catastrophic outcome in which 50% of our economy ended up being informal, and the state, like Big Brother, controlled all of its citizens’ transactions, as if they were criminals deserving of punishment,” Adorni said.
Argentina’s official statistics agency estimates that, as of late 2024, Argentine households and firms held more than $270 billion outside their financial system, largely denominated in U.S. currency. While most of the billions are in foreign bank accounts, a significant amount of cash is also stuffed under mattresses and floorboards and in rented safety deposit boxes in underground vaults across the country.
“Those who do this are not criminals,” Economy Minister Luis Caputo said Thursday. “They are the vast majority of Argentines who have been abused by excessive taxes and controls.
To encourage Argentines to spend their repatriated funds, the new measures scrap strict requirements for businesses and credit card providers to report citizens’ purchases to ARCA, Argentina’s equivalent of the IRS. They relax strict tax evasion rules so property buyers and public notaries won’t need to report transactions. Banks won’t be able to request access to clients’ tax records.
“It sounds like an invitation not to pay taxes,” said Ignacio Labaqui, a Buenos Aires-based senior analyst at advisory firm Medley Global Advisors.
That raises concerns about an injection of potentially dirty funds, some of which could be the product of illegal activity. Asked about the danger created by the new fiscal incentives, the IMF sounded a cautious note.
“The authorities have committed to strengthening financial transparency,” said Julie Kozack, an IMF spokesperson. “Any new measures, including those that may be aimed at encouraging the use of undeclared assets, should be, of course, consistent with these important commitments.”
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Associated Press writers Almudena Calatrava and Debora Rey in Buenos Aires, Argentina, contributed to this report.
