President Javier Milei has announced his decision not to legally oppose the creation of local currencies by provincial authorities. This statement came after a public exchange with Ricardo Quintela, the governor of La Rioja province.
During a January 14 interview with Radio Mitre, President Milei articulated his belief that the market should dictate the value of these new, so-called "quasi-currencies." However, he cautioned against their potential inflationary impact, warning that "those who receive payments in quasi-currencies from irresponsible governors will clearly see a loss of their income [...] What is not taken from them through budgetary adjustment will be taken from them via inflation in the quasi-currency”.
The Response to Economic Challenges
The backdrop to this decision is President Milei's recent devaluation of the Argentine peso by 50% upon taking office on December 10, 2023. This drastic measure was aimed at curbing the country's soaring inflation, which has reached its highest levels in over three decades.
Additionally, the new president slashed funds allocated from the federal budget to provinces, a move that prompted significant responses from provincial leaders. Governor Quintela of La Rioja has been particularly vocal, citing the need to pay salaries to public employees such as policemen.
He views the creation of a separate currency for his province as a response to what he describes as "the abandonment by the nation." Following suit, Buenos Aires province's governor, Axel Kicillof, also expressed interest in the issuance of a local currency in December 2023.
The Implications of Decentralized Currencies
The concept of provinces issuing their own currencies raises numerous questions about the economic future of Argentina. While it may offer short-term relief, especially in terms of meeting local fiscal demands, the long-term consequences, particularly regarding inflation and the stability of the national economy, are yet to be seen.
As Argentina navigates these uncharted waters, the rest of the world watches with keen interest, waiting to see how this bold experiment in economic autonomy unfolds.