The Disappearing Middle Class and the Invisible Empire: The True Face of Argentina's Underground Economy

When the US dollar also begins to fail, Argentina redefines the meaning of an economic crisis in a suffocating way.

Over ten years, Argentina’s exchange rate skyrocketed from 1:10 to 1:1400—these numbers seem magical, but in fact, they represent a silent transfer of wealth. Those holding US dollars thought they had control over imperial purchasing power until they stepped into the first restaurant. A bowl of noodles costs 100 yuan in RMB—not a tourist spot, just an ordinary neighborhood “fly-by-night eatery.” Ten years ago, the per capita income here was 50 yuan; now, prices are comparable to Shanghai CBD or Paris.

This is not simple inflation. This is stagflation—peso has depreciated over 100 times, yet dollar-priced goods have risen by more than 50%. Even if you are on a sturdy ship of US dollars, the flood of inflation still laps at your ankles.

The Young People’s “Live for Today” Code

Buenos Aires nights are always brightly lit. Bars are bustling, tango halls play music all night, and young people in restaurants are still generously tipping. It looks like a prosperous era, but in reality, it’s an almost desperate “end-of-the-world party.”

In the first half of 2024, Argentina’s poverty rate soared to 52.9%; even after reforms, in the first quarter of 2025, 31.6% of people remained below the poverty line.

The outside world imagines that in a country where currency has failed, young people would frantically buy USDT or Bitcoin for hedging. But the truth is more heartbreaking—most young people are living paycheck to paycheck, with little left after paying rent, utilities, and daily expenses. They are not unwilling to hedge; they simply lack the means.

From 2017 to 2023, real wages in Argentina fell by 37%. Even though nominal wages have increased, the purchasing power of wages in the private sector has lost 14.7% over the past year. What does this mean? You work harder this year than last, but the bread and milk you buy are fewer.

In such an environment, “savings” becomes a ridiculous joke. Since no matter how hard you try, you can’t save enough for a down payment on a house, and since saving money can never keep up with the speed of currency evaporation, converting pesos that could turn to waste paper into instant happiness becomes the only economically rational choice.

A survey shows that 42% of Argentinians feel anxious all the time, and 40% feel exhausted. Meanwhile, 88% admit to using “emotional consumption” to cope with anxiety. They fight future uncertainty with tango steps, and numb their inner helplessness with barbecue and beer.

But this is only the surface. Where do the billions of pesos spent wildly by young people ultimately flow? They do not disappear; under the cover of night, like underground rivers, they converge into the hands of two very special groups.

The Hidden Alliance of Chinese Supermarkets and Jewish Moneylenders

If the Central Bank of Argentina were to shut down tomorrow, the financial system might experience brief chaos; but if 13,000 Chinese supermarkets all closed at once, society could immediately grind to a halt.

The true financial heart of Argentina does not beat in bank buildings but is hidden in deep courtyards and mansions in the Once district. It is a secret alliance forged between Chinese supermarket owners and Jewish financiers with decades of roots.

As of 2021, there are over 13,000 Chinese supermarkets in Argentina, accounting for more than 40% of the country’s total supermarkets. They are not as large as Carrefour, but they are ubiquitous. For the underground economy, these supermarkets are not just places selling milk and bread—they are essentially 24/7 “cash absorption points.”

Most Chinese supermarkets prefer customers to pay in cash. Some even post notices: “Cash payment gets a 10%-15% discount.” This is to evade taxes. Argentina’s VAT is as high as 21%, and merchants are willing to give discounts to keep a large volume of sales outside the official financial system.

A 2011 report showed that the annual sales of over ten thousand Chinese supermarkets had already reached $5.98 billion. A decade later, this figure is only larger. But the problem is deadly—pesos are “hot.” In an environment with triple-digit annual inflation, every second the peso depreciates.

Chinese merchants earn large amounts of pesos in cash and urgently need to convert them into RMB to return home. For Chinese tourists, the most convenient and best exchange rate channels are Chinese supermarkets or Chinese restaurants. But scattered tourists cannot absorb such massive cash, so Chinese supermarkets need another outlet—underground moneylenders, represented by Jews from the Once district.

Jews gather in the wholesale area of Once. Historically, this is where the AMIA bombing occurred on July 18, 1994—a car loaded with explosives crashed into the Jewish community center, killing 85 and injuring over 300. This disaster profoundly changed the survival philosophy of the Jewish community, making them extremely closed and vigilant, forming a highly united circle.

As times changed, Jewish merchants gradually withdrew from physical wholesale businesses and turned to a more proficient field—finance. They operate underground moneylenders called “Cueva (Cave),” utilizing deep political and economic networks to build a capital flow system outside the official channels.

Under long-term foreign exchange controls, the official and black market exchange rates once had a gap of over 100%. This meant that honest currency exchange through official channels could instantly halve the value of assets. Both companies and individuals had to rely on the underground financial network built by Jews.

Chinese supermarkets generate massive pesos daily, desperately needing to convert into hard currency; Jewish moneylenders hold US dollar reserves and global fund transfer channels but require large amounts of pesos cash to sustain high-interest daily lending. The needs of both sides perfectly align, creating a closed commercial loop.

Thus, specialized cash transport vehicles shuttle daily between Chinese supermarkets and Once district under cover of night. The cash flow from Chinese merchants feeds the Jewish financial network, while the dollar reserves of Jews provide the only escape route for Chinese wealth.

Without complicated compliance checks or bank queues, this cross-ethnic tacit trust system has operated efficiently for decades. It is this illegal underground system that provides shelter when official order collapses and supports the basic survival needs of countless ordinary families and businesses.

Dual Tax Evasion: Cash and Cryptocurrency

If Chinese supermarkets and Jewish moneylenders are the main arteries of Argentina’s underground economy, then cryptocurrencies are even more clandestine veins.

The global Web3 community propagates a myth: Argentina is a crypto sanctuary. In this country of 46 million, the crypto holding rate is as high as 19.8%, ranking first in Latin America. But delve into this land, and you’ll find that the truth behind the myth isn’t so glamorous.

Few talk about decentralization ideals, and few care about blockchain technological innovation. All the enthusiasm ultimately points to a naked verb: escape.

Stablecoins account for 61.8% of Argentina’s crypto trading volume. For freelancers with overseas clients, digital nomads, and the wealthy, USDT is their digital dollar. Compared to hiding dollars under the mattress or risking black market exchange, clicking a mouse to convert pesos into USDT is more elegant and safer.

But safety isn’t the only concern; deeper motives lie in concealment.

For ordinary people, their “cryptocurrency” is cash. Why do Chinese supermarkets prefer cash? Because cash payments can avoid invoicing and save 21% tax directly. For workers earning only a few hundred dollars a month, a crumpled peso is their “tax haven.” They don’t need to understand blockchain; they just need to know that paying in cash saves 15%.

For middle class, freelancers, and digital nomads, stablecoins like USDT serve the same purpose. Argentina’s tax authorities cannot track on-chain transfers. A local Web3 practitioner describes cryptocurrencies as “digital Swiss banks.”

An Argentine programmer working on overseas projects, if paid via bank transfer, must be forcibly converted at the official rate and pay high personal income tax. But if paid in USDT, the money becomes completely invisible.

This “peer-to-peer tax avoidance” logic runs through every layer of Argentine society. Whether it’s street vendors’ cash transactions or elite USDT transfers, it’s fundamentally about distrust in the national credit and protection of private property.

In a country with high taxes, low welfare, and continuous currency devaluation, every “gray transaction” is a form of resistance against systemic plunder.

The Cost of Compliance

We usually think that having a decent, tax-paying, compliant job is the ticket to middle class. But in a country with dual currency systems and runaway inflation, this “compliance ticket” becomes a heavy shackle.

Their dilemma stems from an unsolvable arithmetic problem: income anchored to the official rate, expenses anchored to the black market rate.

Suppose you are a senior executive of a multinational, earning 1 million pesos a month. At the official rate of 1:1000, that’s equivalent to $1,000. But in real life, buying milk at the supermarket or fueling at the gas station, all prices are set based on the black market rate (1:1400 or higher). This means that the moment wages are credited, their actual purchasing power is halved.

Worse still, you have no “invisibility” qualification. You cannot give discounts for cash to evade taxes like Chinese supermarket owners, nor hide assets with USDT like digital nomads. Every cent of income is within the reach of the tax bureau (AFIP), fully transparent, with nowhere to hide.

From 2017 to 2023, a large number of “New Poor” (Nuevos Pobres) emerged in Argentina. They were once respectable middle class, educated, living in decent neighborhoods. But after being squeezed by rising living costs and depreciating income, they watched helplessly as they slipped below the poverty line.

This is a society of “reverse淘汰.” Those who maneuver comfortably in the underground economy—Chinese supermarket owners, Jewish moneylenders, freelancers accepting USDT—hold the code for survival amid ruins. Those trying to “play it straight” within the official system end up paying the costs of the system.

Even the most astute among them are only engaged in “defensive” struggles. Many Argentinians use platforms like Mercado Pago with annual yields of 30%-50% to survive. But after accounting for inflation and exchange rate erosion, such APYs only keep pesos from losing dollar value if exchange rates stay stable. Since rates are often unstable, such returns can’t keep pace with peso depreciation.

All financial management and arbitrage are essentially attempts to “not lose” or “lose less,” not genuine wealth growth.

The collapse of the middle class is often silent. They don’t protest on the streets like the lower classes, nor do they emigrate like the wealthy. They just quietly cancel weekend gatherings, switch their children’s private schools, and anxiously calculate next month’s bills every night.

They are the most obedient taxpayers of this country, yet also the most thoroughly exploited.

The Gamble of Reform

Milei is tearing down a wall that has lasted for decades. This “madman” president, a believer in the Austrian school, wields a chainsaw in a social experiment that has attracted worldwide attention: cutting 30% of government spending and lifting years of foreign exchange controls.

The effects are immediate. Fiscal surplus appears after years, inflation drops from 200% to around 30%, and the once 100% high black-market official rate gap shrinks to about 10%.

But the cost of reform is severe. When subsidies are cut and the exchange rate is liberalized, the new poor and paycheck-to-paycheck groups bear the brunt of the first wave. Surprisingly, despite the hardships, most people still support the reform.

Argentina’s history is a cycle of collapse and reconstruction. From 1860 to 1930, it was one of the wealthiest countries in the world; afterward, it fell into long-term decline, oscillating between growth and crisis. The liberal reforms of 2015 ultimately failed. Will this round of reform be a turning point to break the cycle? Or will it be another brief hope followed by deeper despair?

No one knows the answer. But what is certain is that the underground world built by Jewish moneylenders, Chinese supermarkets, and countless “inflation-proof” individuals possesses strong inertia and vitality. It provides shelter when official order collapses and chooses to hide and adapt when order is restored.

Savage Vitality

At the end of the article, we return to that lunch.

In a country with soaring prices and currency collapse, people still maintain the habit of tipping, still spin in tango halls, and still chat happily in cafes. This savage vitality is the true underlying color of this nation.

For a hundred years, Buenos Aires’ Casa Rosada has changed owners again and again, the peso has been devalued repeatedly. But ordinary people, relying on underground transactions and gray wisdom, have stubbornly found their way out of dead ends.

As long as Argentina’s desire for “stability” remains less than its longing for “freedom”; as long as the public’s trust in the government remains lower than their trust in street vendors, the underground economy will always exist.

On this South American continent, official economics textbooks have long lost relevance. Instead, a vast underground empire woven from countless transactions, trust, and gray wisdom persists.