The Crisis of Argentine Capitalism

By Paul H. Lewis | Go to book overview

CHAPTER FIFTEEN
Capital on Strike

The real problem of Argentine business in the 1960s was not, strictly speaking, a shortage of capital but a lack of willingness to invest. In 1973 a former high official of the Economics Ministry, Juan Quilici, estimated that $10 billion of Argentine capital was deposited in banks in Zurich, London, Paris, and New York. If that money had been channeled into Argentina's economy, the country might have overcome its stagnation.1

Money was drained illegally out of Argentina's economy through the informal financial network existing outside the regular banking channels, as well as through the vast underground economy in which individuals of all classes participated. Much of it was raised through tax evasion, which spot investigations by the DGI showed to be extremely widespread. One study, carried out in a rural district of southern Buenos Aires Province, showed that only 3 percent of the farmers there complied correctly with the tax laws. But farmers were no worse than anybody else. A former DGI chief, Elbio Coelho, admitted that other investigations revealed similar levels of tax evasion throughout the population. In some parts of the country, he said, fewer than half of the potential taxpayers even bothered to fill out a form.2

Businessmen involved in foreign commerce had ample opportunity to evade taxes by underinvoicing goods they exported and overinvoicing those they imported. Since much local business was on a cash basis, it frequently went unrecorded. As in foreign trade, the blank invoice was commonly used. Since the penalties for tax evasion were so light, companies regularly falsified their records and lied on their tax forms. Another method for hiding transactions from the tax collector was to use a cheque volador (flying check). This was either an undated check that served as a demand note payable upon presentation, or a postdated check that could be used as a promissory note. Either way, it allowed businessmen to buy goods and services they needed without ready cash while also keeping the transaction secret. If the signatory's reputation was good, a

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