After decades of financial crises, Argentines tend to keep their money just about anywhere except a bank – under the couch, dug in the backyard or in bulletproof bunkers. One ex-politician famously stashed cash at his local convent. The nuns helped out.
President Javier Milei convinced nearly 300,000 Argentines to declare over US$20 billion in a tax amnesty programme that established that deposits above US$100,000 had to remain untouched in bank or brokerage accounts until January 1, 2026, to avoid a levy. After that, Argentines with the so-called CERA accounts will be free to move their money – a test of locals’ confidence in the libertarian leader, as well as a possible inflection point for Argentines’ saving habits.
“Changing the ‘under-the-mattress’ culture in Argentina will take years,” said Sebastián Domínguez, chief executive of SDC tax advisors and a professor at the University of Buenos Aires. “Something has clearly changed – it’s not the same as two years ago – but Argentina’s history is hard to erase. It takes election after election to stay on this path.”
Rooted in past crises – most notably the 2001 collapse, when dollar deposits were converted into pesos overnight – millions of Argentines hoard cash at home, acutely aware of how rapidly financial conditions can deteriorate. As recently as October, a market sell-off sent locals rushing to buy greenbacks for fear of another political pendulum swing before the midterm elections.
The tide may be turning under Milei after his party prevailed in the midterm vote and he won support in Congress last week to pass the first annual budget in years. Inflation has also dropped sharply on his watch and pre-election rumours of a peso devaluation have dissipated.
Milei has another card up his sleeve to keep savings in the bank and coax more undeclared funds into the economy to underpin growth. Congress just passed his legislation called the Fiscal Innocence Law, which significantly raises the minimum levels before Argentina’s tax authority can pursue citizens for tax evasion and other financial crimes. The main aim is to encourage greater use of undeclared funds without fear of legal scrutiny down the line.
“There’s nearly US$200 billion sitting under mattresses that could be earning interest and generating credit,” Economy Minister Luis Caputo said at a conference with local investors in December. “It doesn’t make sense, but most Argentines do it – and that has to change.”
Private sector dollar deposits in the financial system have more than doubled since Milei took office two years ago to US$36 billion, the highest since a run on the banks in early 2002. It’s a positive development, but still a fraction of the estimated US$204 billion of cash Argentines hold outside banks, according to a Central Bank report from last year.
Argentina’s last major tax amnesty took place under the market-friendly government of Mauricio Macri, who launched a programme in 2016 that attracted even larger sums, totalling around US$120 billion. However, an economic crisis doomed his presidency by 2019 and dollar deposits nosedived again once the leftist Peronist movement returned to power and tightened capital controls.
Under Milei, the end of the CERA lockup would mark a “particularly important test,” local broker Grit Capital Group said in a note to investors, adding that there is a “meaningful possibility” households and companies could move capital abroad once restrictions lift.
“Confidence is building, but the default choice for high-net-worth Argentines remains to keep their dollar savings offshore,” said Walter Stoeppelwerth, the firm’s chief investment officer.
According to the tax agency, the amnesty brought nearly US$24.5 billion into CERA special accounts. At a recent press conference, Central Bank Governor Santiago Bausili said the amount that remains locked in the system – and could potentially be withdrawn starting in January – is now “well below US$20 billion.” Neither the Central Bank nor tax agency responded to requests for updated figures or on whether the government is taking preventive measures.
Some analysts expect Argentines to rotate some of the freely available funds into investment portfolios, adding that rising dollar deposits is significant in a country where the banking system remains structurally small.
The fact that they continue to grow is a sign of trust toward Milei’s economic program, said Pilar Tavella, head of macro and sovereign strategy at Balanz.
“So far, we are not seeing urgency to pull funds out,” she said. “There will be some movement, but we expect it to be contained.”
by David Feliba, Bloomberg
