How black money should save Argentina’s economy

Argentina has beef – in the truest sense of the word. Cattle have always been kept and grown there, the meat is practically national dish and export hit in one. But many Argentinians can no longer afford the meat, because inflation has massively raised the cost of living in the country.

“The prices for different goods have increased by more than 50 to 100 percent and more”, in the magazine “Global Times”. People are forced to compare prices in different supermarkets. Some only bought the bare essentials. Instead of beef, chicken now ends up on the plate.

Argentina is behind Zimbabwe. In April 2024 she reached her record: almost 290 percent. Since then it has been and is currently in the double -digit range. But distrust of its currency, the peso, and the banks stay high. The Argentinians secure savings and plants, if they can, in foreign currencies. In the meantime, as many dollar notes are now nowhere outside the United States as in Argentina. It is estimated that the citizens have a total of $ 250 and $ 400 billion in cash or abroad.

When he took office, President Javier Milei announced that it would minimize Argentina’s budget deficit and to strengthen the economy again. The government also accepted a devaluation of the state currency to replace it with the dollar. Dollarization is one of the last instruments in countries that have lost control of their currency to create stability. Countries like El Salvador, Panama or Ecaudor have already successfully followed this path.

But in Argentina the necessary prerequisites are missing: the foreign exchange rate is empty, the country is highly indebted and Milei and his cabinet were missing the necessary imagination for a sensible implementation. Private individuals were also forbidden to acquire larger dollar amounts. The result: a flourishing black market on the streets in Buenos Aires, where citizens exchanged their pesos in dollars to secure themselves against the fluctuations in value.

Now President Milei wants the savers to spend this money. “If these funds are pumped into the economy, this will lead to an enormous acceleration of the growth rate,” he said last in a television interview. This is equivalent to legalization of black money.

For this purpose, the government now wants to loosen or abolish reporting obligations by decree and a draft law that it had introduced after 2019. If certain amounts of money are transferred or withdrawn in cash, the tax authorities have to be informed so far. So far, this also applied to real estate and car sales. These so -called capital control checks should actually help to support the crashing peso. But they only led to a distortion between the black market and the official exchange rate. Investors and entrepreneurs pushed the government to change the course.

“It is like legalization of black money, but without paying without taxes,” said Argentina’s President Milei on television. “It’s not about taking tax, but about making funds available. So that people can freely dispose of their money.”

The only question is whether it is really useful. In the weakening Argentine economy with increasing inflation and living costs, wages of employees remained low. In the meantime, the average content of the Argentinians was around 200 euros per month. Anyone who wanted to make ends meet with this money at the end of the month hardly had anything left that they could have exchanged for a few dollars.