“Chachos” are already circulating in La Rioja: the quasi-currency that challenges Milei

2024-09-03 18:05:00

There are few places in Argentina like riojais a desolate province nestled in the clay highlands of the country’s northwest bordering Chile.

it’s here, in La Rioja, the best place to observe the financial cost of President Javier Milley’s “shock therapy”a risky attempt to control long-term inflation. La Rioja went bankrupt when Mire slashed monthly transfers from the federal government to the provinces. In February, the company fell into default. Soon, the fragile local economy fell into a deep recession.

So the province’s governor, Ricardo Quintela, an outspoken critic of Millay, implemented a radical plan. He created La Rioja’s own currency, “el chacho”, printed banknotes and began delivering them Distributed in packages of 50,000 to all public officials. Quintela explained that it’s a small added bonus that helps people buy basic products they otherwise wouldn’t have access to. Businessmen were not forced but encouraged to accept chachos just like pesos. 1 Chacho is equivalent to 1 Peso.

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On a cold morning in late August, Workers across the province, wearing thick coats, lined up to receive new coins.. As the line moved at a snail’s pace from morning to afternoon, some complaints began to surface — “50,000 dirty Chachos in seven hours,” one complained — but the overall atmosphere was relaxed. They chatted and drank yerba mate. They receive about $40, a huge sum in a province where the average monthly salary is just $240.

With the money in hand, it didn’t take long for them to spend it.

Sales at Refinor gas station in the provincial capital surged 10% that morning. At Noed-Fama, a small corner butcher shop, about half of the customers paid in the new currency in the first week. Cashier Juan Bonaldi commented that the owner, worried about leaving too many chachos, had his own (very detailed) rules: Customers buy meat for the equivalent of at least 80 pesos , you will receive the peso change. Otherwise, changes will be made in cash, or if changes cannot be made, the order will be cancelled.

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For traders eager to get rid of chachos, Quintela delivers them to two government offices in the capital, where, after a mandatory 48-hour wait, they will be exchanged for pesos. Quintela told them that by December, the provincial government will pay 1.17 pesos per chacho, equivalent to 17% peso interest, with an annualized interest rate of more than 50%.

This illustrates the essence of Chajos’s entire plan: to provide a way out for a defaulting province that has been cut off from federal funding and blocked from access to domestic and international debt markets. Can get financing and keep spending.

Even in a country known for its bloated public sector, La Rioja stands out.

The province is controlled by the left-wing Peronist party, which has been in power for most of this century, and the government employs two-thirds of the province’s workers. He owned dozens of companies—mining, vineyards, poultry farms, glass factories—through which he controlled much of the local economy. As Mire began his frantic attempts to break the Peronist economic model and correct the country’s course, perhaps it was inevitable that La Rioja would be the first to fall. Critics of the provincial government have given it a damning label: Venezuela.

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Mariana Chanampa, vice-president of a chamber of commerce on the outskirts of Rioja’s capital, confirmed that people were willing to queue for hours “to receive benefits that would last them a few days,” an indication of how people Compared to Venezuela, the idea is sound. Chacho “is a reflection of this poverty,” he said.

The provincial government declined to comment Burundi.

Ángel Vicente “Chacho” Peñaloza is a legend in the province. Its monuments dot the landscape. In most of them, Chacho, a fierce local leader famous for his battles with the Buenos Aires army During the civil wars of the 19th century, he commanded his troops in a threatening posture, carrying a spear over his shoulder.

This is the wild image that adorns the new banknotes. There is also a QR code on each banknote, which when scanned displays a very stern message against the Milley government’s deprivation of legitimate federal funds from the province.

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Chachos come in denominations ranging from 1,000 to 50,000. So far, approximately 3 billion Chachos (approximately $3 million) have been distributed, with this amount expected to increase to 9 billion soon. For now, the numbers are small, but according to experts, they are a sign of things to come in La Rioja and the country as a whole. They insist that if the strategy seems to be working in La Rioja, or at least winning political points for Quintera, other governors may follow suit.

“Who’s to say another governor wouldn’t do something similar?”asked Nicolás Casas, professor of economics at the National University of La Rioja. He doubts anyone will try the idea anytime soon, but he said enthusiasm for the idea may start to grow. “Like a snowball.”

Similar things have happened in the past. In the early 2000s, the federal government imposed an austerity program on the country similar to Millay’s current plan, and the provinces issued their own currencies. In total, more than a dozen provinces joined, including La Rioja (which also tried it in the eighties).

The coins had mixed success as the country descended into crisis before the new Peronist government that arrived in Buenos Aires in 2003 converted them all into pesos.

Millay rarely talked about the boy, but showed that, true to its liberal philosophy, it would not seek to ban itNor will he offer to exchange it for pesos, as some of his allies have demanded. “Absolutely not”, he assured on social network X in January.

The exchange rate between the Chacho and the Peso is ironclad. Quintera said that while stores can refuse to accept chachos, they cannot impose discounts by accepting chachos as payment. He promised that offenders would be shut down.

However, it’s hard to stop it. This guy has obvious limitations. “You have to go everywhere to see which stores accept them,” teacher Edith Leguize complained after collecting 50,000 Chachos. Of course, they are also not suitable for traveling to neighboring provinces.

There are also restrictions on employers, such as using them to pay workers’ wages. So many stores only give credit coupons as change to customers who pay with money. On some websites, discounts of up to 10% on the purchase of Chachos have begun to appear.

Chanampa, the chamber’s leader, said she was surprised by how quickly Riojas spent their chachos after receiving them. He said they remembered how previous experiments with local currencies and other relief programs had failed, leaving only severely devalued pieces of paper.

“They are worried that this will happen to them again,” Chanampa said.. “It’s just a Band-Aid. “It doesn’t solve the problem. “

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