The left-wing governor of La Rioja, a province of Argentina that went broke has found found a simple solution. Just print your own local money–the chacho.
Chachos are a new emergency currency used solely in that province.
The name “chacho” in Spanish usually refers to “a little boy”, but in Riojas province it is also the nickname of a local hero.
“Who would have imagined that one day I’d find myself wishing I’d gotten pesos?” Lucia Vera, a music teacher emerging from a gymnasium packed with state workers waiting to get their monthly bonus of chachos worth 50,000 pesos (about $40) told AP News.
In La Rioja’s capital, signs that say “Chachos accepted here” are now seen on the windows of many places, like big supermarkets, gas stations, fancy restaurants, and hair salons. The local government promises that you can exchange chachos for pesos at an equal rate, and you can also use them to pay taxes and utility bills.
However, there is a downside. Chachos can only be used within La Rioja, and only businesses that are registered can trade chachos for pesos at specific government exchange locations.
These bills are issued in denominations ranging from 1,000 to 50,000 chachos and can only be used within the province of La Rioja, where businesses can accept them for goods and services. However, they cannot be used outside of the province, and only registered businesses can exchange them for pesos at specific government points
The bills bear the face of Ángel Vicente “Chacho” Peñaloza, the caudillo, or strongman, famed for defending La Rioja in a 19th-century battle against national authorities in Buenos Aires.
After entering office in December 2023, Milei swiftly imposed his shock therapy in a bid to reverse decades of budget-busting populism that ran up Argentina’s monumental deficits.
The cuts caused problems for all of Argentina’s 23 provinces but boiled over into a full-blown crisis in La Rioja, where the public payroll accounts for two-thirds of registered workers and the federal government’s redistributed taxes cover some 90% of the provincial budget.
With just 384,600 people and little industry beyond walnuts and olives, La Rioja received more discretionary federal funds than any other last year except Buenos Aires, home to 17.6 million people. Yet the province’s poverty rate tops 66% — the result, critics say, of a patronage system long used to placate interest groups at the expense of efficiency.
While Milei’s reforms forced other provinces to tighten their belts and lay off thousands of employees, Governor Ricardo Quintela — an ambitious power broker in Argentina’s long-dominant Peronist movement and one of Milei’s fiercest critics — refused to absorb the strife of austerity.
“I’m not going to take food from the people of La Rioja to pay the debt that the government owes us,” Quintela told The Associated Press, portraying his chacho-printing plan as a daring stand against 10 months of crumbling wages, rising unemployment and deepening misery under Milei.
La Rioja defaulted on its debts in February and August and a New York federal judge ordered the province to pay American and British bondholders nearly $40 million in damages in September.
Argentina’s Supreme Court is taking up the case of the province’s refusal to charge consumers sky-high prices for electricity after Milei’s removal of subsidies.
Milei and his supporters argue that Quintela’s plan is just a repeat of Argentina’s old Peronist habits of overspending, which they believe caused the severe financial problems that Milei’s government is now trying to fix.
“You were used to having your tie fastened for you and your shoes polished, but now, you’ve got to tie the knot yourself,” Eduardo Serenellini, press secretary of Milei’s office, snapped at La Rioja business leaders on a recent visit to the province. “When you run out of cash, you run out cash.”
Serenellini picked up a chacho note, then flicked it away like lint.
Gov. Quintela’s gambit in the remote province has had little effect on Argentina’s federal finances, but that could change if more cash-strapped provinces catch on, as happened during Argentina’s terrible financial crisis of 2001, when a similarly brutal austerity scheme sent over a dozen provinces scrambling to print their own parallel currencies.
Unlike two decades ago, when former President Néstor Kirchner, a Peronist, put an end to the chaos by redeeming “patacones,” “cecacores” and “boncanfores” for pesos, President Milei has ruled out a bailout for La Rioja.
“We will not be accomplices to irresponsible people,” Milei warned in a recent interview with Argentine TV channel Todo Noticias. But the libertarian purist added that he couldn’t stop La Rioja from doing what it pleased, considering that Argentina’s constitution allows for such desperate financial workarounds.
The chacho hit the streets in August after La Rioja’s legislature approved plans to run off $22.5 billion pesos worth of the currency to help cover up to 30% of public sector salaries.
With La Rioja’s average income sinking below $200 per month and stores shuttering for lack of business, authorities doled out 8.4 billion pesos worth of the scrip in monthly bonuses in August and September, an effort to help workers cope with Argentina’s 230% annual inflation and spur the stricken local economy.
To encourage the chacho’s use, authorities promise to pay interest of 17% on bills held to maturity on December 31.
“The closer we get to the expiration date, the more we’ll see public confidence in the chacho increase,” said provincial treasurer adviser Carlos Nardillo , but state workers interviewed in the many chacho lines spilling onto La Rioja’s sidewalks last month said they wanted to get rid of the bills as quickly as possible and merchants said they felt locked in a catch-22.
Rejecting chachos meant turning away customers, but accepting chachos meant filling cash registers with money that can’t be exchanged for foreign currencies like the US dollar and which is discounted versus the Argentinian peso.
Sources: VOA, AP News, ChatGPT.
