Argentina to scoop $3bn windfall from hidden foreign cash

Jake Cordell
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Mauricio Macri has been working hard to unwind the policies of his predecessor
Mauricio Macri has been working hard to unwind the policies of his predecessor (Source: Getty)

Argentina's public finances could receive a $3bn (£2.3bn) boost from a landmark scheme to uncover hundreds of billions in hidden cash.

The Bank of America Merrill Lynch (BAML) said today it expects around $35bn of money stored overseas by Argentinean nationals to be declared, under the amnesty offered by President Mauricio Macri as part of his attempts to haul Argentina back into the international money markets.

Earlier this year Macri said he would offer Argentineans who stashed cash in overseas bank accounts and funds during the reign of his Peronist predecessors the chance to repatriate the money at super-low tax rates. Currency controls, tight regulations and runaway inflation under former president Cristina Fernandez de Kirchner prompted nationals to squirrel away an estimated $400bn - $500bn in hidden overseas accounts.

Macri has tried to restore trust in the country's institutions and its respect for private wealth in order to encourage people to start putting money back into Argentina's banks and companies.

Argentina's hidden treasures

BAML estimates
Hidden overseas capital $400bn
Declared under amnesty $35bn
Repatriated under amnesty $7bn
Tax revenues $2.9bn
Invested in private sector $4.7bn
Invested in government bonds $2.3bn

Figures do not sum due to complicated relationship between amounts repatriated, the issuance of new government debt and what products tax is liable to be paid on.

BAML estimate around eight per cent of the hidden funds will flood back to Argentina, resulting in a $3bn windfall for the government's coffers and as much as $4.7bn in extra domestic investment.

The bank's Latin American strategist, Sebastian Rondeau said in a note today: "We believe the tax amnesty on hidden capital will be extremely successful, clearly exceeding the conservative target of the government, of $20bn of declared funds.

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"We expect $35bn of declared assets ... In an optimistic scenario, we see $60bn of declared assets."

The bank notes Macri isn't just using the carrot to entice the funds to come back home, citing new agreements struck by Argentina's tax authorities that will make it harder to hide foreign money.

The president, who assumed office in December following an historic election victory at the end of last year, has been on a big drive to reverse the damage inflicted on Argentina's standing with the international community. Moves included striking a deal with the so-called "vulture funds" to settle Argentina's longstanding government debt crisis and pave the way for a return to international bond markets.

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