Broke Argentine province counters austerity cuts with new currency

LA RIOJA, Argentina — 

They look similar cash, acceptable into wallets similar currency and the politician promises they'll beryllium treated similar cash.

But these brightly colored banknotes aren't pesos, the depreciating nationalist currency of Argentina, oregon U.S. dollars, everyone's wealth of prime here.

They are chachos, a caller exigency tender invented by the left-wing populist politician of La Rioja, a state successful the country's northwest that went broke erstwhile far-right President Javier Milei slashed national fund transfers to provinces arsenic portion of an unprecedented austerity program.

"Who would person imagined that 1 time I'd find myself wishing I'd gotten pesos?" said Lucia Vera, a euphony teacher emerging from a gymnasium packed with authorities workers waiting to get their monthly bonus of chachos worthy 50,000 pesos (about $40).

Across La Rioja's capital, "Chachos accepted here" decals present look connected the windows of everything from concatenation supermarkets and state stations to upscale restaurants and hairsbreadth salons. The section authorities guarantees a 1-to-1 speech complaint with pesos, and accepts chachos for taxation payments and utilities bills.

But there's a catch. Chachos can't beryllium utilized extracurricular La Rioja, and lone registered businesses tin swap chachos for pesos astatine a fewer authorities speech points.

"I request existent money," said Adriana Parcas, a 22-year-old thoroughfare vendor who pays her suppliers successful pesos, aft turning down 2 customers successful a enactment who asked if they could bargain her perfumes with chachos.

The bills carnivore the look of Ángel Vicente "Chacho" Peñaloza, the caudillo, oregon strongman, famed for defending La Rioja successful a 19th-century conflict against nationalist authorities successful Buenos Aires. A QR codification connected the banknote links to a website denouncing Milei for refusing to transportation La Rioja its just stock of national funds.

After entering bureau successful December 2023, Milei swiftly imposed his daze therapy successful a bid to reverse decades of budget-busting populism that ran up Argentina's monumental deficits. The cuts squeezed each of Argentina's 23 provinces but boiled implicit into a full-blown situation successful La Rioja, wherever the nationalist payroll accounts for two-thirds of registered workers and the national government's redistributed taxes screen immoderate 90% of the provincial budget.

With conscionable 384,600 radical and small manufacture beyond walnuts and olives, La Rioja received much discretionary national funds than immoderate different past twelvemonth but Buenos Aires, location to 17.6 cardinal people. Yet the province's poorness complaint tops 66% — the result, critics say, of a patronage strategy agelong utilized to placate involvement groups astatine the disbursal of efficiency.

While Milei's reforms forced different provinces to tighten their belts and laic disconnected thousands of employees, Governor Ricardo Quintela — an ambitious powerfulness broker successful Argentina's long-dominant Peronist question and 1 of Milei's fiercest critics — refused to sorb the strife of austerity.

"I'm not going to instrumentality nutrient from the radical of La Rioja to wage the indebtedness that the authorities owes us," Quintela told The Associated Press, portraying his chacho-printing program arsenic a daring basal against 10 months of crumbling wages, rising unemployment and deepening misery nether Milei.

La Rioja defaulted connected its debts successful February and August. A New York national justice ordered the state to wage American and British bondholders astir $40 cardinal successful damages successful September. Argentina's Supreme Court is taking up the lawsuit of the province's refusal to complaint consumers sky-high prices for energy aft Milei's removal of subsidies.

"There's an alternate way to the cruelty of policies that the president is applying," Quintela said.

He appeared confident, speaking arsenic Milei's support ratings dipped beneath 50% for the archetypal clip since the extremist economist came to power.

But arsenic Milei and his allies archer it, Quintela's alternate offers small much than a instrumentality to Argentina's habitual Peronist sphere of reckless spending — and insolvency — that delivered the unmitigated situation that his authorities inherited.

"You were utilized to having your necktie fastened for you and your shoes polished, but now, you've got to necktie the knot yourself," Eduardo Serenellini, property caput of Milei's office, snapped astatine La Rioja concern leaders connected a caller sojourn to the province. "When you tally retired of cash, you tally retired cash."

Serenellini picked up a chacho note, past flicked it distant similar lint.

Gov. Quintela's gambit successful the distant state has had small effect connected Argentina's national finances, but that could alteration if much cash-strapped provinces drawback on, arsenic happened during Argentina's unspeakable fiscal situation of 2001, erstwhile a likewise brutal austerity strategy sent implicit a twelve provinces scrambling to people their ain parallel currencies.

Unlike 2 decades ago, erstwhile erstwhile President Néstor Kirchner, a Peronist, enactment an extremity to the chaos by redeeming "patacones," "cecacores" and "boncanfores" for pesos, President Milei has ruled retired a bailout for La Rioja.

"We volition not beryllium accomplices to irresponsible people," Milei warned successful a caller interrogation with Argentine TV transmission Todo Noticias. But the libertarian purist added that helium couldn't halt La Rioja from doing what it pleased, considering that Argentina's constitution allows for specified hopeless fiscal workarounds.

The chacho deed the streets successful August aft La Rioja's legislature approved plans to tally disconnected $22.5 cardinal pesos worthy of the currency to assistance screen up to 30% of nationalist assemblage salaries.

With La Rioja's mean income sinking beneath $200 per period and stores shuttering for deficiency of business, authorities doled retired 8.4 cardinal pesos worthy of the scrip successful monthly bonuses successful August and September, an effort to assistance workers header with Argentina's 230% yearly ostentation and spur the stricken section economy.

To promote the chacho's use, authorities committedness to wage involvement of 17% connected bills held to maturity connected December 31.

"The person we get to the expiration date, the much we'll spot nationalist assurance successful the chacho increase," said provincial treasurer advisor Carlos Nardillo Giraud.

Most authorities workers interviewed successful the galore chacho lines spilling onto La Rioja's sidewalks past period said they wanted to get escaped of the bills arsenic rapidly arsenic possible.

"Now the chacho is an alternative, an enactment for radical who can't marque it to the extremity of the month," said 30-year-old physics teacher Daniela Parra, mounting her boyfriend's motorcycle with arms afloat of chachos, acceptable to walk them each successful 1 spell astatine the supermarket. "Who knows what volition it beryllium adjacent month?"

On the streets, merchants said they felt locked successful a catch-22.

Rejecting chachos meant turning distant customers with caller spending powerfulness successful a heavy recession. But accepting chachos meant filling currency registers with wealth that's worthless to overseas suppliers and already changing hands astatine a discount to pesos connected the street.

"They've formed a strategy wherever you're forced to beryllium connected the authorities for everything," said Juan Keulian, the manager of La Rioja's Center for Commerce and Industry. "There's nary prime successful a spot similar this."