Underground Argentina: Jewish banks, Chinese supermarkets, destitute young people, and the impoverished middle class

Original author: Sleepy.txt, Beating

In Argentina, even the US dollar has lost its effectiveness.

Pablo's background is somewhat unique. Ten years ago, he was a Huawei employee stationed in Argentina, where he lived for two years; ten years later, he returned to his old home as a Web3 developer to attend the Devconnect conference.

This perspective, spanning a decade, made him a firsthand witness to a brutal economic experiment.

When he left, one US dollar was worth only a dozen pesos; now, the black market exchange rate in Argentina has skyrocketed to 1:1400. According to the simplest business logic, this means that if you have US dollars in your pocket, you should have royal purchasing power in this country.

However, this "dollar superiority complex" only lasted until the first lunch.

"I made a point of going back to the ordinary neighborhood where I used to live and found a small restaurant I used to frequent," Pablo recalled. "I ordered a bowl of noodles, which cost 100 yuan."

It wasn't a wealthy area teeming with tourists, but rather a bustling, down-to-earth neighborhood filled with everyday life. Ten years ago, a meal here cost no more than 50 RMB per person; now, in this place defined by global media as a "failed state," prices are directly comparable to those in Shanghai's CBD or Paris in Western Europe.

This is a classic case of "stagflation." Although the peso has depreciated by more than 100 times, the price of goods denominated in US dollars has actually increased by more than 50%.

When a nation's credit completely collapses, inflation becomes an indiscriminate flood; even if you're on the seemingly sturdy ship of the dollar, the water will still rise above your ankles. This country, in a magical way, passed on the cost of its currency collapse to everyone, including those holding hard currency.

Many people assumed that amidst such turmoil, people would panic and hoard dollars, or embrace cryptocurrencies as predicted by tech enthusiasts. But we were all wrong.

Here, young people neither save money nor buy houses, because the value of their wages begins to evaporate the moment they receive them; here, the real control of the financial lifeline is not the central bank, but a shadow financial network woven by Jewish money changers in the Once district and more than 10,000 Chinese supermarkets throughout Argentina.

Welcome to underground Argentina.

Young people dare not have a future

To understand Argentina's underground economy, one must first understand the survival logic of a group: young people who "live for the moment."

If you walk the streets of Buenos Aires at night, you'll experience a profound cognitive illusion: the bars are bustling, the tango music plays all night, and young people in restaurants still generously tip 10%. It doesn't look like a crisis-stricken country undergoing "shock therapy," but rather like a golden age.

But this is not a symbol of prosperity, but a near-desperate "apocalyptic carnival." In the first half of 2024, the country's poverty rate soared to 52.9%; even after Millais pushed through reforms, 31.6% of the population was still struggling below the poverty line in the first quarter of 2025.

In the grand narrative of the Web3 community, Argentina is often described as a "crypto utopia." The outside world imagines that in this country where currency has failed, young people frantically buy USDT or Bitcoin as a safe haven as soon as they receive their paychecks.

But Pablo, during his on-site visits, coldly punctured the bubble of this elitist perspective.

"This is actually a misconception," Pablo bluntly pointed out. "Most young people are typical spendthrifts, with little left after paying rent, utilities, and daily expenses. They simply don't have any savings to exchange for US dollars or stablecoins."

It's not that they don't want to avoid risk, but that they don't have the right to avoid risk.

What hinders saving is not just poverty, but also the "devaluation of labor".

From 2017 to 2023, Argentinians' real wages fell by 37%. Even though nominal wages rose after Millais came to power, the purchasing power of wages in the private sector still lost 14.7% in the past year.

What does this mean? It means that a young Argentinian works harder this year than last, but earns less bread and milk in return. In this environment, "saving" becomes an absurd joke. As a result, a near-rational "inflation immunity" has spread among this generation.

Since no matter how hard you try, you can't save enough for a down payment on a house, and since the speed of saving money can never keep up with the speed of currency evaporation, then immediately exchanging the pesos in your hand, which may become worthless at any time, for happiness in the present moment becomes the only choice that conforms to economic rationality.

A survey revealed that 42% of Argentinians constantly feel anxious, and 40% feel deeply exhausted. However, at the same time, a staggering 88% admitted to combating this anxiety through "emotional spending."

This collective psychological contradiction is precisely a microcosm of the country's century of ups and downs. They use tango steps to fight against the uncertainty of the future and use barbecue and beer to numb the sense of powerlessness deep in their hearts.

But this is only the surface of underground Argentina. Where did the hundreds of millions of pesos that were recklessly spent by young people ultimately go?

They didn't disappear. Under the cover of night in Buenos Aires, this cash flowed like underground rivers, eventually converging in the hands of two very special groups.

One is the largest "cash vacuum cleaner" in all of Argentina, and the other is the "underground central bank" that controls the lifeline of the exchange rate.

Chinese supermarkets and Jewish money shops

If the Central Bank of Argentina were to suddenly announce a shutdown tomorrow, the country's financial system could be thrown into temporary chaos; but if the 13,000 Chinese supermarkets were to close simultaneously, Argentina's social operations could be paralyzed immediately.

In Buenos Aires, the true financial heart doesn't beat in opulent bank buildings, but is hidden in the cash registers on the streets and in the secluded mansions of the Once district.

This is a secret alliance formed by two groups of outsiders: one group consists of supermarket owners from China, and the other group consists of Jewish financiers who have been working in the industry for over a century.

In Argentina, nothing is more pervasive in the fabric of a city than "Supermercados Chinos" (Chinese supermarkets). As of 2021, there were over 13,000 Chinese supermarkets in Argentina, accounting for more than 40% of the country's total. They may not be as large as Carrefour, but their strength lies in their ubiquity.

For Argentina's underground economy, these supermarkets are not just places to sell milk and bread; they are essentially 24/7 "cash deposit collection points."

Most Chinese supermarkets try to get customers to pay in cash. Some restaurants will remind you that you can enjoy a discount if you pay in cash, and some will even post a notice: "10% to 15% discount for cash payment".

This is actually for tax avoidance. Argentina's consumption tax is as high as 21%, and in order to prevent the government from taking a cut of this revenue, businesses are willing to offer discounts to consumers, just to keep a huge amount of turnover outside the official financial system.

"The tax authorities must have known, but they haven't investigated it thoroughly," Pablo said in the interview.

A 2011 report showed that the annual sales of tens of thousands of Chinese supermarkets had already reached $5.98 billion. More than a decade later, this figure is only much larger. But there is a fatal problem: the peso is a "hot potato," depreciating every second in an environment of triple-digit annual inflation.

"Chinese businessmen earn a lot of pesos in cash and need to exchange them for yuan to take back to China, so they will look for various ways to exchange money," Pablo said. "For Chinese tourists, the most convenient and best exchange rate channel is Chinese supermarkets or Chinese restaurants, because they urgently need yuan to offset the pesos in their hands."

However, scattered tourists cannot handle such a massive amount of cash, and the Chinese supermarket needs another outlet. In Buenos Aires, only underground banks, represented by Jews from the Once district, have the capacity to absorb such a large amount of cash.

"Historically, Jews gathered in a wholesale district called Once. If you've seen movies about Argentine Jews, some scenes were filmed in Once," Pablo explained. "There were synagogues there, and it's the only place in Argentina where a terrorist attack has occurred."

He was referring to the AMIA bombing on July 18, 1994.

That day, a car bomb rammed into the AMIA Jewish community center, killing 85 people and injuring more than 300—one of the darkest chapters in Argentine history. After the incident, a massive wall was erected outside the synagogue, covered with the word "peace" in various languages.

This disaster completely changed the Jewish community's philosophy of life. From then on, the entire community became extremely closed off and vigilant. These walls not only protected them from the bombs but also fostered a highly introverted and tightly knit circle.

As times changed, Jewish merchants gradually withdrew from the physical wholesale industry and turned to the field they were more adept at—finance.

They operated underground banks known as "Cueva," leveraging their deep connections in the political and economic spheres to build a financial network independent of the official system. Today, some have moved out of the Once district, and other ethnic groups, including Chinese, have taken up the business of underground banking.

Under Argentina's long-standing foreign exchange controls, a massive gap of over 100% existed between the official exchange rate and the black market rate. This meant that anyone who honestly exchanged currency through official channels would see their assets instantly lose half their value. This forced both businesses and individuals to rely on the underground financial network established by Jewish people.

Chinese supermarkets generate massive amounts of peso cash daily and urgently need to exchange it for hard currency; Jewish money changers possess dollar reserves and global fund transfer channels, but require large amounts of peso cash to maintain their daily high-interest lending and exchange operations. The precise matching of these two needs creates a perfect business loop.

Thus, in Argentina, armored trucks (or a few inconspicuous private cars) shuttle between Chinese supermarkets and the Once district every night. The cash flow of the Chinese provided a continuous source of funding for the Jewish financial network, while the Jewish dollar reserves provided the only escape route for the wealth of the Chinese.

Without the need for cumbersome compliance reviews or waiting in line at banks, this system has operated efficiently for decades thanks to this cross-ethnic tacit understanding and trust.

In an era when the state apparatus was dysfunctional, it was this unregulated underground system that sustained the most basic survival needs of countless ordinary families and businesses. Compared to the crumbling official peso, Chinese supermarkets and Jewish money changers were clearly more trustworthy.

peer-to-peer tax avoidance

If Chinese supermarkets and Jewish money shops are the main arteries of Argentina's underground economy, then cryptocurrency is the more hidden vein.

For the past few years, a myth has been circulating in the global Web3 community: Argentina is the mecca of cryptocurrency. Data seems to corroborate this – in this country of 46 million people, cryptocurrency ownership is a staggering 19.8%, ranking first in Latin America.

But when you delve into this land like Pablo did, you'll find that the truth behind the myth isn't sexy. Few people talk about the ideals of decentralization, and few care about the technological innovation of blockchain.

All the passion ultimately points to a naked verb: escape.

"Outside of the crypto world, the average Argentinian doesn't have a high level of awareness about cryptocurrencies," Pablo said. For most Argentinians who use cryptocurrencies, this isn't a revolution about financial freedom; it's simply a defensive battle to preserve the value of their assets. They don't care about Web3; they only care about one thing: whether USDT can prevent their money from losing value.

This explains why stablecoins account for 61.8% of crypto trading volume in Argentina. For freelancers with overseas operations, digital nomads, and the wealthy, USDT is their digital dollar.

Compared to hiding US dollars under your mattress or risking exchanging currency on the black market, clicking the mouse to exchange pesos for USDT seems more elegant and safer.

But security is not the only consideration; the deeper motivation lies in concealment.

For ordinary people, their "cryptocurrency" is cash.

Why do Chinese supermarkets prefer cash payments? Because cash payments eliminate the need for invoices, saving a direct 21% tax. For salaried workers earning only a few hundred dollars a month, this crumpled peso is their "tax haven." They don't need to understand blockchain; they just need to know that paying in cash is 15% cheaper.

For the middle class, freelancers, and digital nomads, stablecoins like USDT play a similar role. Argentine tax authorities cannot detect on-chain transactions. A local Web3 practitioner described cryptocurrency as a "digital Swiss bank." A programmer in Argentina undertaking overseas projects, if receiving payments through a bank, is not only forced to convert currency at the official exchange rate but also has to pay high personal income tax. However, if receiving payments in USDT, the money becomes completely invisible.

This logic of "peer-to-peer tax avoidance" permeates every stratum of Argentine society. Whether it's cash transactions by street vendors or USDT transfers by the elite, it essentially reflects a distrust of the state's credit and a protection of private property. In a country with high taxes, low welfare, and a constantly depreciating currency, every "grey transaction" is a resistance against systemic exploitation.

Pablo recommended a web app called Peanut, which can be used without downloading, offers exchange rates close to the black market rate, and even supports Chinese identity verification. This app is currently experiencing rapid growth in Argentina. The popularity of such apps precisely demonstrates the market's desire for "escape routes."

Although the tools have become readily available, this Noah's Ark still only carries two types of people: the complete underground (the poor who use cash and the rich who use crypto) and the digital nomads who have overseas income.

When the poor use cash to avoid taxes and the rich use crypto to transfer assets, who is the only loser in this crisis?

The answer is heartbreaking: it's the law-abiding "honest people".

Compliance traps honest people

We often think of having a respectable, tax-paying, and compliant job as a ticket to the middle class. But in a country with a dual monetary system and runaway inflation, this "compliant ticket" becomes a heavy shackle.

Their predicament stems from an unsolvable arithmetic problem: income is pegged to the official exchange rate, while expenditures are pegged to the black market exchange rate.

Let's say you're a senior executive at a multinational corporation with a monthly salary of 1 million pesos. In official reports, using an exchange rate of 1:1000, your salary is equivalent to $1000. However, in real life, when you buy milk at the supermarket or fill up your gas station, all prices are pegged to the black market exchange rate (1:1400 or even higher).

With this inflow and outflow, your actual purchasing power is halved the moment your salary arrives in your account.

Worse still, you don't have the option to "go invisible." You can't evade taxes by offering cash discounts like a Chinese supermarket owner, nor can you hide your assets by receiving payments in USDT like a digital nomad. Every penny of your income is within the reach of the IRS (AFIP), completely transparent, and there's nowhere to hide.

Thus, a harsh sociological phenomenon emerged. From 2017 to 2023, Argentina saw a surge in the number of "new poor" (Nuevos Pobres).

They were once respectable middle-class individuals, highly educated, and living in nice neighborhoods. But caught between rising living costs and depreciating incomes, they watched helplessly as they slid towards poverty.

This is a society of "reverse selection." Those who thrive in the underground economy—Chinese supermarket owners, Jewish moneylenders, and freelancers who collect USDT—have mastered the secrets to survival in the ruins. Meanwhile, those who try to "work properly" within the official system become the ones paying the price for the system's costs.

Even the most astute members of this group are only engaging in a defensive struggle.

In the interview, Pablo mentioned the "financial wisdom" of Argentina's middle class. For example, they use platforms like Mercado Pago, which offer annualized returns of up to 30% to 50%, to maintain a savings account.

Sounds impressive? But Pablo did the math: "Taking into account the exchange rate erosion caused by inflation, such an APY can only keep the value of their pesos in dollars if the exchange rate is stable. However, exchange rates are often unstable, and overall, such a return cannot keep up with the rate of peso depreciation."

In addition, many savvy Argentinians will recklessly cash out their credit cards before the peso is about to plummet, then exchange the cash for US dollars to profit from the inflation arbitrage.

But these are all just "defenses," not "offenses." In a country where monetary credibility has collapsed, all financial management and arbitrage are essentially attempts to "avoid losses" or "minimize losses," rather than genuine wealth growth.

The collapse of the middle class often happens silently.

They don't protest by burning tires like the lower classes, nor do they emigrate like the rich. They simply cancel weekend dinners quietly, change their children's private schools, and anxiously calculate next month's bills every night.

They are the most obedient taxpayers in this country, and also the group most thoroughly exploited.

A gamble on the nation's destiny

Pablo's return to Argentina this time revealed a microcosm of the country's transformation in a corner electrical outlet.

Argentina once practiced a near-absurd form of trade protectionism, requiring all electrical appliances to conform to "Argentine standards," forcibly removing the top of the universal three-prong plug, otherwise prohibiting their sale. This was not merely a plug issue; it was a symbol of mercantilist barriers, using administrative orders to force citizens to pay for inferior and overpriced domestic products.

Now, Milley is tearing down that wall. This "madman" president, a believer in the Austrian School, is wielding a chainsaw to conduct a social experiment that has caught the world's attention: cutting government spending by 30% and lifting years of foreign exchange controls.

The effect of this move was immediate. The government saw a fiscal surplus unseen for many years, the inflation rate fell from a staggering 200% to the 30% range, and the previously exponential 100% difference between the official and black market exchange rates was compressed to around 10%.

However, the cost of reform is excruciating.

When subsidies were cut and the exchange rate was liberalized, the newly impoverished and those living paycheck to paycheck, mentioned earlier, bore the brunt of the initial impact. However, to Pablo's surprise, despite the hardship, most of the people he encountered still supported Millais.

Argentina's history is a cycle of periodic collapse and reconstruction. From 1860 to 1930, it was one of the richest countries in the world; but thereafter it fell into a long period of recession, oscillating between economic growth and crises.

In 2015, Macri took office and lifted foreign exchange controls in an attempt to liberalize the economy, but this ultimately failed, leading to the reimposition of controls in 2019. Will Milley's reforms be a turning point that breaks this cycle, or will it be another brief period of hope followed by deeper despair?

No one knows the answer. But what is certain is that the underground world, built by Jewish money changers, Chinese supermarkets, and countless individuals "immune to inflation," possesses powerful inertia and vitality. It provides refuge when the official order collapses, and chooses to lie dormant and adapt when the official order is rebuilt.

Finally, let's return to Pablo's lunch.

"At first I thought that with prices so high, the waiters must be making a lot of money, so I only gave a 5% tip. Later, my friend taught me that I should still give a 10% tip," Pablo recalled.

In a country where prices are soaring and the currency is collapsing, people still maintain the habit of tipping, still dance in tango clubs, and still chat and laugh in cafes. This raw vitality is the true essence of this country.

For a century, the Casa Rosada in Buenos Aires has changed hands many times, and pesos have been lost one after another. But the common people, through underground transactions and their own cunning, have managed to find a way out of this dead end.

As long as this country's desire for "stability" remains less than its yearning for "freedom," and as long as the people's trust in the government remains less than their trust in the Chino on the street corner, then the underground Argentina will exist forever.

Welcome to underground Argentina.

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