A  new currency circulating in a region of Argentina is seen by some as an answer to the economic woes brought on by national budget cuts.

The notes are called “chachos” and they were invented by the leaders of the La Rioja province in the northwestern portion of the country. They were created by the left-leaning provincial leadership after far-right president Javier Milei, in his austerity program, reduced federal budget transfers to several provinces.

Throughout La Rioja, businesses display signs that inform consumers that the chachos are acceptable in transactions. The local government guarantees a one-to-one exchange with the nation’s peso. Chachos may be used for provincial government business such as tax payments and utility bills. The notes, however, are not recognized outside of the province, where they are worthless. Only registered businesses can swap chachos for pesos at a few government exchange points.

The bills bear the face of Ángel Vicente “Chacho” Peñaloza, who defended La Rioja in a 19th-century battle against national authorities in Buenos Aires. A QR code on the note links to a website denouncing Milei for refusing to transfer La Rioja its fair share of federal funds.

While Milei’s 2023 reforms forced other provinces to tighten their belts and lay off thousands of employees, Governor Ricardo Quintela of La Rioja — an ambitious power broker in Argentina’s long-dominant Peronist movement and one of Milei’s fiercest critics — refused to absorb the austerity measures.

“I’m not going to take food from the people of La Rioja to pay the debt that the government owes us,” Quintela told The Associated Press. He cited his chacho-printing plan as a daring stand against 10 months of crumbling wages, rising unemployment and deepening misery under Milei.

The chacho hit the streets in August after La Rioja’s legislature approved plans to run off $22.5 billion pesos worth of the currency to help cover up to 30% of public sector salaries.

Milei and his allies view Quintela’s alternative as little more than a return to Argentina’s habitual Peronist preserve of reckless spending — and insolvency — that delivered the unmitigated crisis that his government inherited.

Economists believe Quintela’s gambit in the remote province has had little effect on Argentina’s federal finances, but that could change if more cash-strapped provinces turn to the same solution, as happened during Argentina’s financial crisis of 2001, when a similarly brutal austerity scheme sent over a dozen provinces scrambling to print their own parallel currencies.

To encourage the chacho’s use, authorities promise to pay interest of 17% on bills held to maturity on Dec. 31.

“The closer we get to the expiration date, the more we’ll see public confidence in the chacho increase,” said provincial treasurer adviser Carlos Nardillo Giraud.

Merchants said they felt locked in a catch-22 situation.

Rejecting chachos means turning away customers with new spending power in a deep recession. But accepting chachos means filling cash registers with money that’s worthless to foreign suppliers and already changing hands on the street at a discount to pesos.

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