- A poor province in Argentina made its own currency to boost its local economy.
- Government workers last month received a new currency called chachos.
- They can exchange the chachos for pesos, or wait until December to exchange them at a 17% interest rate.
La Rioja, a poor province in Argentina, created its own currency—the chacha—to boost the local economy and offset the effects of President Javier Milei's economic reforms.
Bloomberg wrote in a report this week that the local economy fell into a recession after the national government cut monthly revenue transfers to the provinces earlier this year, causing La Rioja to go broke in February.
President Milei won his campaign last year running almost solely on a platform aimed at curbing the country's sky-high inflation with aggressive fiscal cuts and the potential adoption of the US dollar.
Argentina's 12-month inflation rate topped 276% in February, making it the highest inflation rate in the world.
But amid Milei's aggressive cuts to get the economy back on track, La Rioja has been unable to continue spending without federal support or loans.
Governor Ricardo Quintela's new chacho is meant to turn the province's struggling economy around, with about $3 million worth of the currency handed out so far.
Government workers, who make up around two-thirds of the workforce in the province, received chacho payments equal to around $40 in late August. That's a large sum compared to the average salary in the region of $240, according to Bloomberg.
The workers can go to government offices in the region's capital city to exchange chachos for pesos in an even trade, or wait until December and swap them at a higher exchange rate.
Quintela has directed stores to stick to a strict one-to-one chacho-to-peso rate, but said vendors can refuse to accept chachos. Consumers have been quick to use their the new currency, eager to spend after so long without cash, and fearful that the currency could go defunct.
Business owners, too, have tried to get rid of their chachos as soon as they get them, with some enacting policies to only return change in pesos if purchases exceed a certain amount, according to Bloomberg.
La Rioja and other provinces also issued their own currencies in the early 2000s, during a similarly severe round of fiscal cuts.