A Familiar Strategy in a New Era
By Jorge Castillo, Managing Director, Coriats Uruguay
A Familiar Strategy in a New Era
Argentina’s latest Blanqueo, a capital regularisation programme under President Javier Milei’s administration, was introduced to bring dollars back into the formal economy during a recession. The offer was straightforward: Argentines could repatriate up to $100,000 tax-free, with a modest 5% tax on larger sums. As technical issues delayed the process, the deadline for participation was extended to 30 April 2025, with tax rates increasing up to 15% by the end of that period.
This is not Argentina’s first experience with tax amnesty programmes. Mauricio Macri’s government ran a similar initiative in 2016, successfully drawing in over $100 billion. The key question now is whether this version will produce lasting benefits or if it is simply another cycle of short-term inflows without real structural change.
Signs of Success: Money is Returning
If the numbers are accurate, El Blanqueo is having an effect. By October 2024, an estimated $18 billion had re-entered the banking system, helping stabilise the economy. This influx has supported a reduction in Argentina’s exchange rate gap, which reached its lowest point since 2019, hovering around 10%. Financial markets, long sceptical of Argentina’s erratic policies, have responded positively, at least for now.
What is particularly striking is the enthusiasm among Argentines themselves. Whether driven by economic confidence or national pride, many prefer to keep their wealth within the country rather than moving abroad. Despite Argentina’s turbulent history of inflation and policy swings, the wealthy and middle class remain strongly attached to their homeland.
A Sceptical View: A Short-Term Fix or a Skewed Narrative?
Despite the positive indicators, doubts remain about whether El Blanqueo represents meaningful change. While an influx of funds is promising, there are concerns that these deposits may be temporary, taking advantage of tax breaks before being withdrawn again. Without addressing structural economic issues such as inflation and legal certainty, this could be a short-term boost rather than lasting reform.
Another key question is how much of this enthusiasm is driven by patriotism rather than economic confidence. Argentina has a long history of financial instability, yet many citizens are deeply loyal to their home country. Are they bringing funds back out of trust in Milei’s policies, or is national sentiment influencing decision-making? If optimism is rooted in national pride rather than solid economic fundamentals, the long-term impact may be less certain than it appears.
What Lies Ahead?
The biggest test for El Blanqueo will be whether these capital inflows persist beyond 2025. If economic conditions improve and confidence in Argentina’s financial system strengthens, this could mark the beginning of a genuine recovery. However, if history is any indication, the risk remains that once the tax incentives disappear, so will the money.
For now, optimism is prevailing. If one reliable indicator of Argentine economic confidence is the summer season in Punta del Este, then the Uruguayan tourism data suggests things are moving in the right direction. Whether that confidence lasts through 2025, however, remains to be seen.