The new banknotes, which feature Angel Vicente “Chacho” Penaloza, a prominent character in local history, are intended to ease the transition of public sector workers in the province to reduced federal budget allocations.
The governor guarantees they will be handled like cash because they fit inside wallets and have a similar appearance.
These vividly colored banknotes, however, are not pesos—Argentina’s rapidly declining national currency—or US dollars—everyone’s preferred form of payment here.
The governor of La Rioja, a left-wing populist province in the northwest of the country, created chachos, a new emergency tender, after far-right President Javier Milei cut federal budget transfers to provinces as part of an extraordinary austerity program. La Rioja went bankrupt.
“Who would have thought that I would be wishing I had received pesos one day?” Declared Lucia Vera, a music instructor, as she came out of a gymnasium filled with state employees waiting to receive her chacho bonus, which is worth 50,000 pesos (about $40) per month.
“Chachos accepted here” stickers are now plastered on the windows of everything from high-end eateries and hair salons to chain supermarkets and petrol stations all around the city of La Rioja. In order to pay taxes and utility bills, the local government takes chachos and ensures a one-to-one exchange rate with pesos.
There’s a catch, though. Only registered firms are able to exchange chachos for pesos at a few government exchange locations; chachos are not usable outside of La Rioja.
Adriana Parcas, a 22-year-old street vendor who receives payment from her suppliers in pesos, declared, “I need real money,” after turning away two consecutive customers who inquired about purchasing her fragrances with chachos.
The QR code to report Milei
The image on the bills is that of Angel Vicente “Chacho” Penaloza, a strongman known as a caudillo who famously defended La Rioja against Buenos Aires national authority in the 1800s.
The banknote has a QR code that takes users to a page criticizing Milei for not transferring La Rioja’s fair share of federal funding.
Milei quickly implemented his shock therapy after becoming power in December 2023 in an effort to undo decades of populism that broke budgets and caused Argentina’s enormous imbalances. All twenty-three of Argentina’s provinces were affected by the cuts, but in La Rioja, where two thirds of registered workers are employed by the government and 90% of the province’s budget is funded by redistributed taxes from the federal government, the situation spiraled out of control.
La Rioja, with only 384,600 residents and minimal industry other than walnuts and olives, received more discretionary federal money last year than any other region—the only exception being Buenos Aires, which is home to 17.6 million people. However, the province has a poverty rate above 66 percent, which opponents attribute to a patronage system that has long been employed to appease special interests at the price of effectiveness.
While neighboring provinces were compelled by Milei’s reforms to tighten their belts and lay off thousands of workers, one of Milei’s most vociferous detractors and an ambitious power broker in Argentina’s long-dominant Peronist organization, Governor Ricardo Quintela, refused to accept the hardships of austerity.
Quintela told The Associated Press, “I’m not going to take food from the people of La Rioja to pay the debt that the government owes us.” Quintela presented his chacho-printing idea as a bold protest against ten months of declining earnings, increased unemployment, and increasing suffering under Milei.
Debt defaults and a financial crisis
La Rioja was behind on its payments in August and February. In September, a federal judge in New York ordered the province to reimburse bondholders, who were American and British, for over $40 million in damages. Following Milei’s elimination of subsidies, the province refused to charge customers exorbitant fees for electricity. This is the matter that Argentina’s Supreme Court is now considering.
Quintela stated, “There is a different route to the harsh policies that the president is implementing.”
Speaking as Milei’s approval ratings fell below 50% for the first time since the radical economist took office, he gave off an air of confidence.
However, Quintela’s alternative, according to Milei and his allies, provides little more than a return to Argentina’s customary Peronist pattern of irresponsible spending and insolvency, which is what caused the severe catastrophe that his government inherited.
“During a recent visit to La Rioja, business leaders were met with a sharp remark from Eduardo Serenellini, the press secretary for Milei’s office: “You used to have your shoes cleaned and your tie knotted for you, but now you have to tie the knot yourself.” “Cash runs out when you run out of it.”
Picking up a chacho note, Serenellini threw it away like lint.
The federal finances of Argentina have not been significantly impacted by Governor Quintela’s gamble in the isolated province, but this could change if other financially strapped provinces adopt a similar strategy. This was the case during Argentina’s catastrophic financial crisis in 2001, when a similarly harsh austerity plan forced more than a dozen provinces to print their own parallel currencies.
President Milei has ruled out rescuing La Rioja, in contrast to the Peronist previous president Néstor Kirchner, who brought order to the pandemonium two decades ago by exchanging “patacones,” “cecacores,” and “boncanfores” for pesos.
Milei recently cautioned, “We will not be accomplices to irresponsible people,” in an interview with the Argentine television network Todo Noticias. However, the libertarian purist went on to say that since Argentina’s constitution permits such extreme financial maneuvers, he was powerless to prohibit La Rioja from acting as it wished.
After La Rioja’s legislature approved plans to use $22.5 billion pesos in currency to assist cover up to 30% of public sector salaries, the chacho began to appear on the streets in August.
Authorities distributed 8.4 billion pesos worth of the scrip in monthly bonuses in August and September, hoping to help workers deal with Argentina’s 230 percent annual inflation and boost the struggling local economy. At the time, La Rioja’s average monthly income had fallen below $200, and stores had closed due to a lack of business.
Authorities pledge to pay interest of seventeen percent on bills held until maturity on December 31 in order to incentivize the use of the chacho.
Carlos Nardillo Giraud, an advisor to the provincial treasurer, predicted that public trust in the chacho would grow as the expiration date approached.
The majority of state employees who were interviewed last month in the numerous chacho lines that spilled into La Rioja’s sidewalks expressed a desire to eliminate the bills as soon as feasible.
As she mounted her boyfriend’s motorcycle and prepared to spend all of her chachos in one trip to the grocery store, 30-year-old physics teacher Daniela Parra remarked, “Now the chacho is an alternative, an option for people who can’t make it to the end of the month.” “What will it be next month, who knows?”
Merchants on the streets claimed to feel trapped in a Catch-22 situation.
In a severe recession, turning away chachos meant turning away clients with increased purchasing power. Accepting chachos, however, required stocking cash registers with cash that is useless to international vendors and is already being exchanged for pesos at a discount.
Juan Keulian, the head of the Center for Commerce and Industry in La Rioja, stated, “They’ve created a system where you’re forced to depend on the state for everything.” “In a situation like this, there are no options.”
