“There’s no money”.
That is one of the most well-known – and viralized – phrases of the new Argentine president, Javier Milei, who has made it clear that his number one priority is to achieve “zero deficit”, that is, for the country to stop spending more than it has.
To do this, the president ordered that in January the tap that fed that deficit be closed, abruptly stopping ticketing carried out by the Central Bank to finance Treasury expenses.
But that austerity plan has been challenged by one province, The Riojain the northwest of the country, who decided to use Another way to pay.
Its about Mouth of -abbreviated name of the Debt Cancellation Bonus-, a currency that was approved by the province’s Legislature in mid-January, and will be used to pay 30% of the salaries of public administration employees.
According to the Rioja government, the Bocade can be used to pay provincial taxes, services of state companies and to purchase goods in businesses that accept these bonds.
Governor Ricardo Quintela, a Peronist opponent of Milei, said the president left him no choice.
“The national government forces this because of the cruelty of the adjustment”, he pointed.
He also accused the national State of refusing to send the federal funds that correspond to you.
The provincial government has turned to the Supreme Court to demand $9.3 billion (more than US$10 million at the official rate) which, it claims, corresponds to its province due to the “federal tax sharing” system by which the collection is distributed in Argentina.
Quintela asked the Legislature to approve the issuance of Bocades worth up to $22.5 billion (about US$26 million) after facing a strike by the police force and a protest by state health workers.
According to the journalist of the newspaper La Nación Gabriela Origlia, “the province depends almost 90% of the resources provided by the State”.
Another Patacón?
The Rioja It is not the only province that faces problems to pay salaries, but – until now – it has been the only one to issue a quasi-currency.
This resource is not new in Argentina. It has been used in past crises, in fact, in 1986 the Rioja government created a bond called the same, Bocade, which was issued in the format of banknotes with the face of one of the most famous heroes of La Rioja, Facundo Quiroga.
But the greatest proliferation of quasi-currencies occurred during the deepest crisis that the country experienced: that of 2001/02, when several provinces and even the national government They created parallel currencies.
Two of the most remembered from that time were the Petaconesissued by the province of Buenos Aires, and the Lecopnational bonds.
Many also remember how those quasi-currencies ended: losing value until finally they stopped circulatingafter a few years.
The Rioja deputy of the Radical Civic Union Gustavo Galván, a critic of the bocade, pointed out during the legislative debate that the quasi-coins ended up trading at 60% of their initial value.
This is why many politicians and economists consider them “a fraud”which harms those who receive them.
Milei’s response
Far from reproaching the Rioja government, the president gave an ironic welcome to the creation of Bocade.
“To think that in the campaign they treated me like crazy for postulating a scheme in which there was free currency competition and now they are promoting it…!!!,” he said after Governor Quintela’s announcement on his account on X (exTwitter).
Milei thus referred to his electoral proposal to authorize the use of the US dollar on par with the peso.
“Provincial currencies welcome to the competitionwhich, I want to point out, unlike what happened in the past, in no way are they going to be rescued by the National Government,” he warned.
To think that during the campaign they treated me like a crazy person for postulating a scheme in which there was free currency competition and now they are promoting it…!!!
Welcome the provincial currencies to the competition, which, I want to point out, unlike what happened in the past, of… https://t.co/R32q3gGiyh— Javier Milei (@JMilei) January 16, 2024
The president even said that the price of the quasi-currency, and its parity relationship with the peso, “will give a market evaluation of the quality of the Government that issues it…!!! Therefore: LONG LIVE THE COMPETITION LONG LIVE THE FUCK FREEDOM”, he closed, defiantly, with his usual catchphrase.
According to the BBC journalist in Argentina, Veronica Smink, the reappearance of quasi-currencies brings back bad memories to a population already worried about an economy that bordering on hyperinflationwith price increases that exceeded 25% monthly in December.
“However, the fact that other provinces – including the powerful Buenos Aires, which was left in the hands of the Kirchnerist opposition (Peronism) – have ruled out for the moment following in the footsteps of La Rioja provides some peace of mind,” says Smink.
Without funds
The situation in the provinces became more complex in recent months after the outgoing Minister of Economy, and also presidential candidate, Sergio Massa, promoted a law last September that eliminated the Income Tax for the majority of the workers, collection that later was “co-participated” or divided between the different regions from the country.
When Milei took office in December, he also stopped the discretionary transfers that the Executive Branch of the day made to various local governments (generally benefiting its allies), which It further deteriorated the provincial coffers.
Although the new president proposed reversing the elimination of the Income Tax – which generated criticism from many of his supporters, since he himself had voted in favor of eliminating the tax – the governors opposed the unpopular idea.
After several weeks of tension and fruitless meetings, the Minister of the Interior, Guillermo Francos, – who considers that the Bocade are “illegal” – announced that the national government will seek to agree on a solution to the problem of the provinces once the debate in Congress on the controversial “omnibus law” concludes, with which Milei intends to deregulate and shrink the State.
“We will search with the governors a new fiscal pact that allows us a reasonable distribution of the shared resources,” Francos assured last week in statements to Radio Miter.
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