Following Economy Minister Luis Caputo’s call for Argentines to withdraw their dollars and “remonetise” the economy without answering questions, experts worry about legal and tax consequences. Argentina’s government is implementing new deregulatory measures that will enable individuals to utilize US dollars held outside the banking system without the need to disclose the source of these funds — a form of ‘sub-blanqueo’ aimed at enhancing liquidity, supported by a low exchange rate that necessitates a continuous oversupply of foreign currency.
In the absence of foreign financing, Economy Minister Luis Caputo has urged for the repatriation of savings that remain concealed. This situation prompts inquiries regarding the leniency of the La Libertad Avanza administration towards funds acquired through illicit channels, alongside concerns about the resilience of the financial system itself. In a recent interview, Caputo emphasized the concept of remonetisation, advocating for the reinvestment of dollars into Argentina’s economy, highlighting the dynamics of currency competition. Purchasing decisions encompass a range of items, including houses, cars, domestic appliances, and both landline and mobile phones, as articulated by Caputo in a recent interview.
For the government, it is inconsequential whether the funds a family or business utilizes to purchase goods originate from an inheritance, are accumulated through formal employment and spent in the parallel “blue” market, obtained via official channels, or stem from money-laundering activities. “I am skeptical of the narrative suggesting that individuals refrain from utilizing their financial resources.” Caputo remarked on Monday, stating, “The truth is, they don’t because they get their balls broken. For this to be a normal country, nobody should be asking you to explain how you spend your money,” during an appearance on the Tiempo Libre streaming show.
Since March, Argentines have had the ability to make direct payments in dollars using a debit card, contingent upon the funds being previously deposited in a savings account — that is, within the financial system. However, the government is currently focused on the estimated US$271.247 billion that exists outside the formal economy, as reported by Argentina’s INDEC national statistics bureau, at the conclusion of 2024. Another striking figure is the estimated US$4.4 billion that analysts believe has been extracted from the more than US$18 billion legalized 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.
“The government’s objective is to enhance dollar deposits via a form of enduring ‘blanqueo’ [tax whitewash]. It conveys a concerning implication, as it begins with the premise that all dollars originate from a foundation linked to tax evasion, and it implies that this is less severe than if the funds were derived from activities such as drug trafficking, terrorism, and so forth,” economist Jorge Carrera remarked to Perfil. “It represents a rather precarious scenario. It also conveys a sense of urgency to secure those dollars by any means necessary,” he added. Economist Juan Valerdi concurred, cautioning 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 strategy involves executing deregulation through the Central Bank, the ARCA tax authority (previously known as AFIP), alongside the financial and banking sectors. “If international organisations overlooked the [last whitewash] amnesty, which was lax and dangerous, they are unlikely to react strongly to an issue involving relatively small volumes of money hidden beneath the surface of the economy,” stated Valerdi, an expert in tracking offshore accounts and their connections to domestic front men.
A former official from the UIF (Unidad de Información Financiera) money-laundering watchdog, speaking on the condition of anonymity, stated 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 stated: “We’re also under enhanced monitoring by the FATF [Financial Action Task Force money-laundering watchdog], which does not permit the lifting of controls on the origin of funds.” We also consulted tax law experts, who noted that any deregulatory initiative would be complicated by the current legislative framework. Individuals who neglect to disclose the source of their funds during transactions remain subject to three laws that impose significant tax penalties. Any alterations would necessitate the endorsement of Congress.
Law 11.683 delineates 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 indicates that an undeclared transaction would incur a 10 percent tax, in addition to being liable for a 35 percent income tax and a 21 percent value-added tax (IVA). Article 46 of the law stipulates 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.”