Decades of arbitrary, changing, and often simply absurd government measures led many Argentinians to keep most of their savings out of the country and purchase real estate abroad. Meanwhile, less wealthy citizens, without the financial expertise and necessary contacts, have consistently kept their savings in the form of US dollar bills, either in bank vaults or simply at home (‘in the mattress’ is the translation of the Argentine expression for this approach).

The origin of these assets is overwhelmingly legitimate, but a lack of trust in government policies led their owners to hide them from the authorities, including the tax-collection agencies. Congress — with the government parties and most of the opposition voting together — passed a law in July 2016 that encouraged the declaration of these holdings with penalties that range from 5% to 15% of their value, depending on their nature, and the time that the information is received by the national revenue service.

Trust in the new government has translated into results that have surprised government, opposition and independent analysts alike. By the end of 2016, with three more months to go until the end of the moratorium, almost US$100 billion had been declared. To have an idea of the magnitude of this sum — now added to the country’s taxable base — one should take into account that it is about 18% of Argentina’s annual GDP.

This is an excerpt from an article in this month’s Argentina Strategic Brief – for more information please contact us at info@menas.co.uk.