Argentina suspends bank account freezes for small businesses

Argentina's tax agency will stop freezing the bank accounts of small businesses until at least May and will extend repayment plans, Economy Minister Luis Caputo announced on Tuesday, after enforcement actions against shopkeepers turned into a political problem for President Javier Milei.

The number of enforcement measures, including account freezes, liens and restrictions on asset sales, rose 52 percent in the first eight months of the year from the same period a year earlier, reaching 135,744, according to the Buenos Aires Times, which cited the Argentine outlet Todo Noticias and a public-information request filed with the tax authority, known as ARCA.

The tougher collection has helped Milei hold a primary fiscal surplus equal to about 1.2 percent of gross domestic product this year, and inflation has slowed to 33 percent from above 200 percent in early 2024. Argentina already carries the second-highest tax burden in Latin America after Brazil, according to OECD data cited by the Buenos Aires Times. The Inter-American Development Bank approved US$100 million in April for the country to improve tax collection.

A survey by the advocacy group Fundación Observatorio PyME found that 15 percent of Argentina's small and medium-sized industrial firms had faced asset seizures or account freezes over unpaid taxes, and that seven in 10 of those received notices within 30 days of missing a payment. "Before, ARCA didn't move to seize assets so quickly, almost automatically, as it does now," said Pablo Dragun, the group's executive director.

Patricia Bullrich, a senator who has grown increasingly critical of Milei and is seen as a possible candidate in next year's presidential election, welcomed the pause. "Every business owner I talked to told us the same thing: Embargoes are killing companies," she posted on X. She said more measures were needed to restart growth.

Vanesa Camiscia, 38, runs a wholesale produce stall, Vanano, at the Mercado Abasto de Quilmes in Buenos Aires. She said ARCA froze her company's account without notice while she believed she was still negotiating a 60-installment payment plan. "We go to work every day as if it were the last," she said. She said she would not vote for Milei next year, nor for his left-wing opponents.

Martín Blust's family firm, Cuerdas SRL, has made strings for guitars and other instruments since 1952. He said domestic sales have fallen 40 percent since Milei took office and the company owes 55 million pesos (about US$36,000). It stopped producing on Fridays to cut labour costs. "It's a big help but the damage is already done," he said of the decision to unfreeze accounts.

Argentina has lost more than 32,000 private-sector businesses and 265,000 formal jobs since Milei took office, according to government data cited by the Buenos Aires Times. The economy is forecast to grow 1.5 percent this year, below the 5 percent Milei's budget projected, and likely entered a technical recession in the third quarter.

"The government said the cost of disinflation would be temporary," said Guido Zack, director of economics at the Buenos Aires think tank Fundar. "But that cost has become permanent: inflation has stabilised, while costs have not eased."