By Jorge Otaola and Lucinda Elliott
BUENOS AIRES (Reuters) – A tax amnesty program in Argentina encouraging residents to deposit foreign currency stuffed under mattresses, stored in safety-deposit boxes or saved in accounts abroad drew around $18 billion by an initial deadline on Thursday, an official said.
Libertarian President Javier Milei rolled out the plan earlier this year to draw much-needed dollars back to Argentina’s formal economy as it deals with a dearth of foreign currency reserves amid a technical recession.
Argentines have long stored savings outside local banks in a bid to protect their earnings and hedge against the nation’s swings of economic instability, bouts of hyperinflation and the falling value of the peso currency.
The deposits are seen as signs of a vote of confidence in Milei’s leadership as his austerity measures have helped bring down month-on-month inflation to single-digit figures. Annual inflation, however, remains in the triple digits.
Milei’s spokesman, Manuel Adorni, called the tax amnesty a “success” in a press conference as he announced the estimated amount deposited.
Officials were optimistic that these fresh dollars could help local banks offer credit lines to customers and spur growth.
Deposits in private dollar-denominated bank accounts in Argentina have increased to $32.5 billion since the plan began in mid-July, according to analyst estimates, which would mark a further boost outside of the amnesty program.
“The extent to which such a windfall would positively impact net reserves will depend on the increase in (dollar-denominated) credit to the private sector, which has been gaining steam lately,” analysts at J.P. Morgan wrote in a client note earlier this week.
Reserves are expected to continue recovering past the initial deadline, they added.
Argentines hold an estimated $277 billion outside the formal banking system, according to official estimates for 2024.
The first stage of the amnesty allowed Argentines to bring up to $100,000 back into the system tax-free, with amounts over that amount taxed at a 5% rate.
The rate will increase to 10% by the end of January and then to 15% by the end of April.
(Reporting by Jorge Otaola in Buenos Aires and Lucinda Elliott in Montevideo; Additional reporting by Hernan Nessi in Buenos Aires and Kylie Madry in Mexico City; Editing by Jonathan Oatis, David Alire Garcia and Paul Simao)
