Milei's Argentina plays the maxi tax amnesty card

As in a Bourgeois labyrinth. Javier Milei's Argentina advances and retreats, rejoices and despairs. A country on its knees with poverty indices over 50%, an industrial sector destroyed by irresponsible Peronist and liberalist governments. And a financial system propped up by continuous injections of liquidity from the International Monetary Fund. Society split in two: the poor and the middle class against 'el Leon' (one of President Milei's nicknames); finance, banks and a part of business, in favour. Agribusiness, very powerful, gives and takes away support for the president. In alternating current.
Milei's latest political-media move is the maxi amnesty. A large tax amnesty comes into force with the aim of seizing at least 2 billion undeclared dollars and consolidating the still fragile state finances.

This is what the technicians at the Ministry of Economy, led by Luis Caputo, call him. El 'blanqueo', say the opponents. How does it work? It is a zero-cost amnesty of sums up to 100 thousand dollars provided they remain deposited in the banking system or invested in government bonds until 31 December 2025. For assets in excess of $100,000 and without a pre-determined ceiling, a 5% tax rate has been set that will remain in force until 30 September 2024. Those who join after 30 September and until 31 December 2024 will instead pay a rate of 10%, which will increase to 15% if they join between 1 January and 31 March 2025, when the Fiscal Compact expires.

Those who adhere to the Pacto Fiscal will benefit from < an exoneration from all civil actions and for fiscal, currency, customs and administrative infractions; extinction of criminal actions, except those initiated by injured parties; and the non-application of the unjustified capital increase figure'. A reckless operation - according to most analysts, including those of La Nacion, the country's main conservative newspaper - which should, however, allow for an increase in tax revenue equal to 0.3% of GDP and equivalent to about USD 2 billion. The maxi amnesty will cheer those who will be able to repatriate some of their capital from Uruguay, a small neighbouring country long referred to as the 'Switzerland of South America'.

Or from Panama, another tax haven favoured by Argentina's financial operators. The harshest criticism of the long-discussed amnesty had already been anticipated by the Aaj (American Association of Juristas): 'best practices disregarded'. high risk of increasing money laundering operations'. And danger of Argentina's transformation into a narco-state'.

Meanwhile, the International Monetary Fund has revised downwards its forecast for Argentina's GDP to fall in 2024 from the -2.8% estimated in April to the current -3.5%. This can be read in the latest update of the World Economic Outlook, which also forecasts a 5% growth in 2025. "The fiscal and monetary programme is on track to keep inflation in check, but it has had an impact on activity because there is less government spending and monetary conditions have tightened," Fund staff said in a conference. The economic recovery, they also pointed out, could begin as early as the next few months, 'as confidence recovers and real wages rise'. Last month, the IMF concluded the eighth review of the $45 billion aid programme by giving the go-ahead for a final disbursement of about 800 million. The slowdown in price rises in recent weeks is a positive prodrome. It is difficult to predict how far the drama of social cuts will be compatible with Leon Milei's economic policy.