In one of Argentina’s most impoverished regions, La Rioja, the economic impact of President Javier Milei’s aggressive reforms is most evident. This desolate province, nestled in the red-clay highlands bordering Chile, is grappling with the financial consequences of Milei’s drastic measures aimed at curbing rampant inflation. The federal government’s cuts to monthly cash transfers left La Rioja struggling to stay afloat, ultimately pushing it into default in February and plunging the local economy into a deep recession.
In response, Ricardo Quintela, the province’s governor and a vocal critic of Milei, launched a bold plan: he introduced La Rioja’s own currency, the chacho. Quintela printed billions of chachos and distributed them to government employees as a bonus to help cover the essentials. While not legally required, local merchants were strongly encouraged to accept the chacho at par with the peso. One chacho equals one peso.
On a brisk morning in late August, government workers in La Rioja queued for hours to receive their chachos, despite the slow-moving line. The payment, worth around $40, was significant in a province where the average monthly salary is just $240. With their chachos in hand, residents wasted no time spending them. For instance, at a local gas station, business surged by 10% in a single morning, and a butcher shop reported that about half of its customers paid with chachos in the first week.
However, the chacho’s introduction is not without its challenges. To prevent businesses from accumulating too many chachos, merchants can exchange them for pesos at government offices after a 48-hour waiting period. Quintela also promised that those who wait until December to exchange their chachos would receive a 17% premium, effectively an annualized interest rate of over 50%.
This strategy highlights the true nature of the chacho: a desperate attempt by a cash-strapped province, cut off from federal funding and capital markets, to secure financing and maintain spending. Even in Argentina, known for its expansive public sector, La Rioja stands out. The provincial government employs two-thirds of the local workforce and controls a significant portion of the economy through state-owned companies.
As Milei pushes to dismantle the Peronist economic model that has dominated Argentina for decades, it was almost inevitable that La Rioja would be the first to struggle. Critics liken the province to Venezuela, where people wait in long lines for government handouts. Mariana Chanampa, vice-president of a business chamber outside the capital, says the chacho is a symbol of the province’s deepening poverty.
Quintela’s decision to introduce the chacho was inspired by historical precedents. In the early 2000s, amid a similar austerity drive by the federal government, several Argentine provinces, including La Rioja, issued their own currencies. These efforts had mixed results and were eventually phased out in favor of the peso by a new Peronist government in 2003.
While Milei has remained largely silent on the chacho, he has made it clear that, in line with his libertarian beliefs, he will neither ban the currency nor exchange it for pesos. The one-to-one exchange rate between the chacho and the peso is intended to be sacrosanct. Quintela has warned that stores refusing to accept chachos without discounting them will face closure.
Despite these assurances, the chacho has clear limitations. It’s not universally accepted, and many businesses are reluctant to pay employees with it. Some stores issue credit vouchers instead of cash as change for chacho payments, and online platforms have emerged offering to buy chachos at a 10% discount.
Chanampa notes that residents are quick to spend their chachos, fearing that, like previous local currency experiments, they could soon lose value. “People remember how these schemes have failed in the past,” she says. “The chacho is a temporary fix, not a solution to the underlying economic problems.”
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