Monday, July 15, 2024

ECONOMY | 02-07-2024 16:01

La Rioja Province puts its own ‘quasi-currency’ in circulation

New ‘chachos’ enter into circulation, currency honours local caudillo; Provincial Governor Ricardo Quintela announced the plan back in January, which won approval from local legislature a month later.

The northwestern province of La Rioja has put its own “quasi-currency” into circulation as an alternative to the peso – the first new form of money in Argentina in 20 years.

The move comes amid heavy cutbacks in federal contributions and a severe fiscal adjustment introduced by the government led by President Javier Milei, who took office last December.

The provincial government justified the issuance of the Bocades – bonds issued as currency — by drawing attention to the national administration’s failure to share federal revenue-sharing funds. 

La Rioja says it is owed some 9.3 billion pesos (US$9.9 million at the official exchange rate) and the dispute between the State and the province is already on the docket of the Supreme Court. 

“Due to the fact that the national government has not sent the corresponding funds to the province, the devaluation, the austerity and the deep crisis that all the provinces are going through ... the government of La Rioja has decided to put the BOCADE Debt Cancellation Bond in circulation,” the provincial administration said in a press release.


‘Financial instrument’

On the province's official website, where the new banknotes were unveiled, the provincial government described the currency as "a financial instrument" designed to "boost the local financial circuit, reactivating the economy and consumption.”

The provincial government intends to pay at least part of the salaries of public employees in the ‘quasi-currency,’ initially up to a value of 100,000 pesos.

It “will lose value and cheat people with some paper,” was Milei’s view on Sunday during a television interview. 

The Bocades – which the local government has dubbed ‘chachos’ in honour of 19th-century caudillo Ángel Vicente 'Chaco' Peñaloza – were initially trailed by Governor Ricardo Quintela back in January. The local legislature signed off on the proposal at the end of February.

Notes ranging from 1,000 to 50,000 ‘chachos’ have been issued at one-to-one parity with the peso.

According to the bill authorising their printing, the currency will only circulate within the province and can be used at shops that will accept them. In addition, local taxes and services can be paid with these banknotes.

The La Rioja government also clarified that "all businesses may receive these bonds, but they may not charge any surcharge or receive them for a lower value."


Financial woes

Milei won last year’s election with a promise to introduce massive cutbacks in government spending. He has introduced a campaign of strict austerity, laid off thousands of state employees and halted funding to provinces.

Meanwhile, poverty affects more than half the population and inflation is running at an annual 276 percent.

The Bocade is Argentina's first “quasi-currency” in 20 years. Not since the 2001 economic crisis has such an attempt been made – during that era, as many as 15 quasi-currencies were introduced, including the Patacones and Lecop.

The equivalent of nine billion pesos will be placed into circulation between July and August, for a total issuance of 22.5 billion pesos (around US$24.1 million).



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