Javier Milei has turned his state upside down in his one and a half years in power. He radically slashed the budget, closed nine ministries and abolished thousands of regulations. In his first year in power, public spending fell by almost 30%. But even Milei's famous chainsaw could not eliminate a chronic ailment: The state lacks dollars.

Argentina urgently needs US foreign currency to repay debts to private and institutional creditors. In mid-April, the International Monetary Fund granted its largest debtor its 23rd loan. With the fresh 20 billion dollars, the government should primarily ensure that the interest on the 40 billion dollar loan from 2018 can be paid. The new IMF money may not be spent for daily circulation, for example to pay for imports. It is also not intended to support the peso.

But this is exactly what Milei and his finance minister Luis Caputo need foreign currency for. Before the parliamentary elections in October, they are determined to tame inflation, which is still at 45% year-on-year. To achieve this, imported goods are to force industry to produce more cheaply. But the country cannot pay for imports with pesos. The economy also needs fresh money to grow by 5% in 2025, as predicted by the IMF. But Milei has stopped the printing press for a year now. He does not want to print any more pesos, which may be exchanged for dollars and deposited outside the financial system. For 70 years, Argentina's middle and upper classes have been saving their possessions from inflation in this way.

The result is that the Argentinians now own what the state lacks: enormous dollar reserves. The statistics office Indec estimates them at around 400 billion dollars, which corresponds to around twelve times the value of all pesos in circulation. These are worth around 32 billion dollars, according to a recent study by management consultants 1816. Around 193 billion dollars are hoarded in cash, in safe deposit boxes and mattresses. The rest is invested in the dark zones of the global financial system, for example in Panama, the Cayman Islands or the Comoros.

If citizens were to pay even a portion of these savings into their regular accounts, the banks would be able to work with them. So far, the total amount of loans granted corresponds to just 4% of gross domestic product. If the economy could be „remonetised“, according to Finance Minister Caputo, small and medium-sized companies would be able to invest again.

And housing loans could finally be issued again, which have hardly been available since the state bankruptcy in 2001. After 15 years of stagnation, the growth engine could finally start up again.

Javier Milei declared at the beginning of the week that he wanted to give citizens „their money back that they have not been able to use because political criminals have been chasing them under the duvet“. It should be noted that the president refers to his country's financial authorities as criminals. Last year, Finance Minister Caputo had already issued a tax amnesty that made it possible to legalise up to 100,000 black dollars without being asked to pay taxes by the state or being punished for evasion. Taxes had to be paid on higher sums - between 5 and 15%.

The president has now claimed that he wants to waive these taxes in future. Moreover, he does not care at all about the origin of the newly found foreign currency. Milei demanded that the banks should no longer ask about their origin. However, this is almost always illegal. Due to the currency controls in place until April, there were hardly any legal ways to obtain the reserve currency for years. As Milei argues, some of the flight assets are certainly black-coloured white money. But most of it is probably classic black money - undeclared income and bribes. And then there are the dollars from the trade in drugs, weapons or people. Milei will not be able to simply overlook these funds in particular. The international Financial Action Task Force (FATF), which was founded to prevent dirty money from being laundered internationally, has had Argentina under observation for years. Experts warn that if the FATF places his country in the „grey zone“, Caputo could face problems if he takes out new loans on the financial markets again.

„People don't bring their dollars to light because they are afraid,“ explained the minister, referring to the practices of his predecessors. Since the Kirchner governments (2003-2015), the tax authorities have constantly tracked ordinary citizens. Credit card companies had to report their customers' transactions, banks had to report account balances of 800 euros or more, all cash withdrawals were documented, as were transfers of 800 euros or more. Health insurance companies and public schools had to report their contributors, as did online retailers and electronic wallets. If Milei and Caputo want banks and black money holders to follow their lure, they will have to change several laws.

After all, nobody wants to risk being reported for money laundering after a possible change of government. But the government is unlikely to get a majority in favour of this before the elections in October. Caputo has therefore presented some immediate measures that Milei has issued by decree. The permanent surveillance of ordinary citizens is to end from 1 June. 1 June, the reporting limits for banking transactions have been significantly raised, as have those for electronic wallets. The state wants to look the other way generously so that at least ordinary citizens can put their dollars into circulation. But larger assets will continue to be controlled. Argentina clearly does not want to risk a conflict with the FATF.