An Argentine province has a creative solution to President Milei’s austerity measures: It is printing its own money

LA RIOJA, Argentina (AP) — They look like cash, fit in wallets like cash and the governor promises they will be treated like cash.

But these colorful banknotes are not pesos that are losing value National currency Argentina or US dollars are everyone’s money here.

It’s Chachos, a new emergency tender invented by the government left-wing populist governor from La Rioja, a province in the northwest of the country that was going bankrupt at the time right-wing extremist President Javier Milei Cut federal budget transfers to the provinces as part of a unprecedented austerity program.

“Who would have thought that one day I would wish I had gotten pesos?” said Lucia Vera, a music teacher who comes out of a gym full of government workers waiting for her monthly bonus of 50,000 pesos (about $40) worth of chachos -dollars) wait.

Across the capital of La Rioja, stickers reading “Chachos are accepted here” can now be seen on the windows of everything from supermarket chains and gas stations to upscale restaurants and hair salons. The local government guarantees a 1:1 exchange rate with pesos and accepts chachos for tax payments and utility bills.

But there’s a catch. Chachos cannot be used outside of La Rioja and only registered companies can exchange chachos for pesos at some government exchange points.

“I need real money,” said Adriana Parcas, a 22-year-old street vendor who pays her suppliers in pesos, after turning away two customers in a row who asked if they could buy their perfumes with chachos.

The banknotes bear the face of Ángel Vicente “Chacho” Peñaloza, the caudillo, or strongman, known for defending La Rioja in a battle against the national authorities in Buenos Aires in the 19th century. A QR code on the bill leads to a website where Milei is being sued for refusing to give La Rioja its fair share of federal funds.

After taking office in December 2023Miley quickly imposed his shock therapy to reverse decades of budget-destroying populism that has blighted Argentina’s economy monumental deficits. The cuts impacted all of Argentina’s 23 provinces, but led to a full-blown crisis in La Rioja, where two-thirds of registered workers are on the public payroll and the federal government’s redistributed taxes cover about 90% of the provincial budget.

With just 384,600 residents and little industry other than walnuts and olives, La Rioja received more voluntary federal funding last year than any other country except Buenos Aires, home to 17.6 million people. But those of the province Poverty rate exceeds 66% – critics say the result of a patronage system that has long served to appease interest groups at the expense of efficiency.

While Milei’s reforms forced other provinces to tighten their belts Thousands of employees laid offGovernor Ricardo Quintela – an ambitious power broker in Argentina long dominant Peronist movement and one of Milei’s harshest critics – refused to take on the fight over austerity.

“I will not take food away from the people of La Rioja to pay off the debt that the government owes us,” Quintela told The Associated Press, describing his Chacho pressure plan as a daring resistance to ten months of falling wages and rising unemployment and increasing misery among Milei.

La Rioja defaulted on payments in February and August. A New York federal judge in September ordered the province to pay nearly $40 million in damages to American and British bondholders. Argentina’s Supreme Court is considering the province’s refusal to press charges Consumers demand horrendous electricity prices after Milei’s removal of subsidies.

“There is an alternative path to the cruelty of the policies that the president is implementing,” Quintela said.

He appeared confident as Milei’s approval ratings fell below 50% for the first time since the radical economist came to power.

But as Milei and his allies say, Quintela’s alternative offers little more than a return to Argentina’s usual Peronist reserve of reckless spending – and bankruptcy – that triggered the unmitigated crisis his government inherited.

“You were used to having your tie tied and your shoes shined, but now you have to tie the knot yourself,” said Eduardo Serenellini, press secretary for Milei’s office, during a recent visit to the business leaders of La Rioja the province . “If you run out of money, you run out of money.”

Serenellini took a Chacho note and flicked it away like lint.

Governor Quintela’s move in the remote province had little impact on Argentina’s federal finances, but that could change if more cash-strapped provinces crack down, as Argentina did terrible financial crisis of 2001when a similarly brutal austerity program led over a dozen provinces to print their own parallel currencies.

Unlike two decades ago, when former President Néstor Kirchner, a Peronist, ended the chaos by exchanging “patacones,” “cecacores” and “boncanfores” for pesos, President Milei has ruled out a bailout for La Rioja.

“We will not be accomplices of irresponsible people,” Milei warned in a recent interview with the Argentine television channel Todo Noticias. But the libertarian purist added that he could not stop La Rioja from doing whatever it wanted, considering that Argentina’s constitution allows such desperate financial detours.

The Chacho hit the streets in August after La Rioja’s legislature approved plans to siphon 22.5 billion pesos worth of the currency to cover up to 30% of public sector salaries.

As average income in La Rioja fell below $200 per month and businesses closed for lack of orders, authorities handed out monthly bonuses worth 8.4 billion pesos in August and September to help workers with the 230% of the workforce in Argentina. annual inflation And to stimulate the struggling local economy.

To encourage use of the Chacho, authorities promise to pay 17% interest on promissory notes held until maturity on December 31.

“The closer we get to the expiration date, the greater public confidence in the Chacho will be,” said Carlos Nardillo Giraud, adviser to the provincial treasurer.

Most state workers interviewed in the many chacho lines on La Rioja’s sidewalks last month said they wanted to get rid of the bills as quickly as possible.

“Now the Chacho is an alternative, an option for people who can’t make it to the end of the month,” said 30-year-old physics teacher Daniela Parra, who climbed onto her friend’s motorcycle with her arms full of Chachos and ready to give money to spend all at once in the supermarket. “Who knows what it will be next month?”

On the street, traders said they felt trapped.

Rejecting Chachos meant rejecting customers with new purchasing power a deep recession. But accepting chachos meant filling the coffers with money that was worthless to foreign suppliers and changing hands already on the street at a discount on pesos.

“They have created a system in which you are forced to rely on the state for everything,” said Juan Keulian, the director of the Center for Trade and Industry in La Rioja. “In a place like this there is no choice.”

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