Argentina’s government is working on fresh deregulatory measures that will allow people to use US dollars held outside the banking system without having to explain the origin of the funds — a kind of ‘sub-blanqueo’ whitewash aimed at boosting liquidity, sustained by a cheap exchange rate requiring a constant oversupply of foreign currency.
With no access to foreign financing, Economy Minister Luis Caputo has called for savings to be brought out of hiding but this raises questions about how permissive the La Libertad Avanza administration will be when it comes to money obtained through illicit means, as well as how much the system can withstand.
With a focus on currency competition, Caputo spoke in an interview last week of remonetisation – the idea that dollars should be reinvested into Argentina’s economy. To buy houses, cars, domestic appliances, landline or mobile phones, “whatever,” as Caputo said in an interview.
For the government, it would not matter whether the money a family or business uses to buy goods comes from an inheritance, was saved up from formal employment and bought on the parallel “blue” market, acquired through official channels, or is the product of money-laundering.
“I don’t buy the story that people don’t spend their dollars. The truth is, they don’t because they get their balls broken,” Caputo said on Monday, adding: “For this to be a normal country, nobody should be asking you to explain how you spend your money,” in remarks made on the Tiempo Libre streaming show.
Since March, Argentines have been able to pay directly, with dollars, via debit card, provided the funds are already deposited in a savings account — that is, within the system. But the government now has its eye on the estimated US$271.247 billion held outside the formal economy, according to Argentina’s INDEC national statistics bureau, as of the end of 2024.
Another striking figure is the estimated US$4.4 billion that economists believe has been extracted from the more than US$18 billion legalised through last year’s Régimen de Regularización de Activos (“Asset Regularisation Scheme”) blanqueo, which allowed individuals to bring up to US$100,000 into the system entirely tax-free.
Liquidity and 'desperation'
“What the government is seeking is an increase in dollar deposits through a kind of permanent ‘blanqueo’ [tax whitewash]. It sends a worrying message, because it starts from the assumption that all dollars come from a source rooted in tax evasion, and it suggests that this is more benign than if the money came from financing via drug-trafficking, terrorism, etc,” economist Jorge Carrera told Perfil.
“It’s a pretty dangerous situation. It also feels like a kind of desperation to capture those dollars one way or another,” he added.
Economist Juan Valerdi agreed, warning that President Javier Milei’s administration “needs liquidity in the economy, but if it prints money, it fears people will run for the dollar rather than boost economic activity.”
The plan is to implement deregulation via the Central Bank, the ARCA (formerly AFIP) tax bureau and the financial and banking system.
“If international organisations turned a blind eye to the [last whitewash] amnesty, which was lax and dangerous, they’re unlikely to raise hell over something that involves relatively small volumes of money buried beneath the surface of the economy,” said Valerdi, who specialises in tracking offshore accounts and their links to domestic front men.
A former official from the UIF (Unidad de Información Financiera) money-laundering watchdog, speaking on the condition of anonymity, told this outlet that the measure “could encourage the arrival of all sorts of capital, which doesn’t have to be declared personally, because people can use frontmen whose money could come from anywhere.”
They added: “We’re also under enhanced monitoring by the FATF [Financial Action Task Force money-laundering watchdog], which does not allow controls on the origin of funds to be lifted.”
Laws for undeclared funds
Perfil also consulted tax law experts, who observed that any deregulatory push would be complicated by existing legislation.
There are still three laws under which individuals who fail to declare the origin of their funds when carrying out transactions face steep tax penalties. Any changes would require congressional approval.
Law 11.683 establishes in Article 18, subsection F, that “unjustified increases in wealth greater than 10 percent (10%) in income used or consumed through non-deductible expenses shall be considered net income in the year in which they are incurred, for income tax purposes.” This means that not only would an undeclared transaction be taxed at 10 percent – it would also be subject to 35 percent in income tax and 21 percent IVA value-added taxation.
The same law, in Article 46, provides that “any person who through false declarations or malicious concealment harms the Treasury by filing inaccurate tax returns shall be fined between TWO (2) and TEN (10) times the amount of the tax evaded.”
Also applicable are the Criminal Tax Law (27.430) and the Anti-Money Laundering Law (25.246).
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