Summary: I talk about the weird and chaotic nature of Argentina, my country of origin.

I was born in Argentina in the year 1989, while the country was going through hyperinflation (~3000% inflation that year). My parents couldn’t afford disposable diapers so they bought multiple-use cloth ones. My mom washed them after each use. My dad tells me he had to rush to the supermarket and spend his whole monthly salary the day he got paid, because a week later he couldn’t afford almost anything.

In 2001, when I was 12, the country went through a major economic and social crisis. In December 2001, president De la Rua resigned and fled in a helicopter from the Casa Rosada (literally Pink House, the seat of the national government). Supermarkets were sacked. I lived half a block away from one, and remember watching through our window how looters walked the streets with shopping carts full of stolen products.

During my late 20s, in the 2015-2020 period, I poured my heart and soul into creating OpenZeppelin. We hired some of the best people in Argentina to create a world-class blockchain security firm. During that period, Argentina implemented strict capital controls, the price of 1 USD went from 13 ARS to 195 ARS, and market (real) exchange rates were roughly double the artificially manipulated official exchange rates. For each $1,000 USD we wanted to pay employees in Argentina, the company had to spend $3,000 USD. Rules and regulations changed literally every quarter. We eventually had to close the Argentine entity for OpenZeppelin, close down our only office in Buenos Aires, and hire Argentines as international contractors from outside entities.

In only 30 years of my life, I lived through 3 major economic crises, at very different ages. This gave me a particular attitude towards the country that saw me grow: a complete disdain for the prevalent anti-work ethics, a hate of the political caste, and a full mistrust of the government. Mixed with a deep love for its family-centric culture.

So, what’s the deal?

During most of my life, people have asked me about Argentina. People working in crypto were especially interested in the high levels of adoption of the technology from the early days. My shallow but still truthful reply was: we have a strong early adopter culture + our government has fucked us so much that we don’t trust authorities to control money.

I was always hesitant to go very much deeper into explanations. Part of it was that I saw it as too hard to understand unless you lived in Argentina yourself. Another part was that I just didn’t really understand Argentina: it’s hard for fish to see the water.

In 2021, almost exactly 2 years ago, I moved from Argentina to Uruguay. Only with the distance and time living outside can I write about Argentina. I feel I understand it much better now that I’m not living there. You can see things differently from afar, without being involved.

I want to share my thoughts on 3 of the (in my opinion) defining characteristics of the country: genetics, economics, and geo- + crypto-politics.

Genetics

Argentines have a very specific mix of genes. Most of us (80%+ of the population) are descendants of European immigrants, and most also have some native-american blood mixed in. Argentina is literally the place farthest away from the origin of our species in central Africa. Humans only arrived in Argentina roughly 10,000 years ago. Check it out:

This makes our genes a mix of two ever-wandering peoples: (1) nonconformist Europeans who were either fleeing wars & local crises, or sailed to the new world looking for adventures, and (2) the ancient tribes who only stopped exploring the world literally when there was nowhere else to go.

In my case, my Araoz family ancestors came to South America 10 generations back, roughly in 1600. Since then, they’ve intermixed quite a bit with the native population, making me a true ‘mestizo’ (lit. mixed blood or half blood). This explanation I found of my genetic origins helped me understand myself better.

I also think it explains some of the main characteristics of the Argentine culture: an almost excessive disconformity, a lack of hard-working ethics (prefer to escape and start anew rather than work hard to fix things), and distrust of institutions.

I understand genetic determinism is not popular. I just found this model for understanding Argentina very useful. Take it or leave it. I think our genes played a big role in forming our culture, which is now pretty ossified.

Economics

Most of this section is adapted from the 2022 book “Reformas para construir nuestro futuro” from the “Libertad y Progreso” think-tank which I recently finished reading and agree a lot with.

Argentina has some pretty curious economic indicators:

  • Since the 2001 crisis, public expenditure went from a historical average of 30% of GDP to 45% of GDP in 2019. For comparison, in 2022, the average government spending as a percentage of GDP across 125 countries was 16.22%
  • In the same period, tributary pressure rose from 27% to 39%, and it only got worse in 2020 with 3 additional ‘temporary’ taxes added:
    • Millionaire tax, up to 2.25% wealth tax
    • Impuesto PAIS for FX, 30% tax on foreign exchange transactions (ie: a 30% tax on buying dollars or other foreign currencies).
    • Digital service tax, 30% tax on all digital services (Netflix, Spotify, etc.) sold to consumers based in Argentina.
  • Argentina was ranked 2nd in the world on total business tax pressure according to PWC . There are 165 taxes that affect Argentine companies (national, provincial, municipal and extra contributions). This not only creates enormous economic pressure to entrepreneurs, but an administrative and compliance nightmare.
  • 20M people (50% of the 40M population) depend on a monthly payment from the state (4.3M government employees, 7M retired, and ~8M people who live off social plans). Let me say that again because it’s incredible to me: 50% of the population’s livelihood depends on the Argentine state.
  • The formal private sector (contributing to taxes) is only 8M people. The rest of the private sector is 6M people working informally.
  • This means 8M people are producing economic work to sustain 28M people (20M people who live off the state and themselves).
  • Poverty has jumped from 4% of the population in 1983, to more than 40% today. Argentina is one of the very few countries globally where poverty has been growing for decades.

Most of the Argentine economy depends on agriculture, the most heavily taxed activity. For every ton of soy that is sold in the international markets for $500, only approximately ~$167.5 (33%!) goes to the farmer BEFORE income taxes. Bear in mind that this is my own back of the envelope estimates, but here’s how it works:

  • 50% of the value (or worse) is instantly lost when converted to pesos at the official exchange rate. The official conversion rate between the Argentine peso (ARS) and the U.S. dollar (USD) can differ significantly from the real “blue” market rate. This discrepancy can affect the farmer’s final earnings, because they’re converting their USD to ARS at the official rate. So, from $500 to $250. While farmers are forced to convert their revenue from exports at the official rate, a big chunk of their costs are priced in dollars, converting this industry from relatively low risk to high-risk due to exposure to FX rates.
  • Then, you have to subtract 33% of “retenciones” (export tax withholdings). So, from $250 to $167.5
  • Even then, you have to subtract ~35% of income tax. Ouch.

Still, the Argentine farm is so vast and productive that farm owners are some of the richest people in Argentina.

Geo- and crypto-politics

Argentina has some very peculiar geographic characteristics.

It’s the southernmost country in the world. 90% of the world population lives in the north hemisphere. For us, traveling almost anywhere takes 10+ hours via plane. Some destinations like Australia and Japan require more than 30 hours. It’s hard to emphasize how this insulates us from global business.

On the crypto-politics front: Argentina is a melting pot for the explosion of crypto. Many well known and beloved crypto companies originated in Argentina (eg: Ripio, Decentraland, Rootstock, Proof of Humanity, OpenZeppelin, Nomic, Muun). There’s also lesser known projects playing important roles. I know scores of Argentines working behind pseudonyms on key positions at very high profile projects. As I said before, Argentina had the perfect combination of early adopter culture plus a deeply ingrained understanding of why third parties are security vulnerabilities.

(⚠️ unconfirmed wild speculation, low confidence ⚠️: I recently heard various independent rumors that many high profile crypto hacks were done from Argentina. If you think about it, it makes sense: Argentina has an unusually high level of information security expertise, a very low rule of law, laughable law enforcement, and very high corruption rates. Perfect opportunity for black hat hackers to profit from exploiting DeFi protocols. Although I didn’t verify the rumors (and don’t want to), I wonder how this huge inflow of dirty money could affect the country in the next decade, if it’s true)

Regardless, I think the opportunity is even bigger for Argentina if the government nurtures local crypto industry and talent, instead of fighting, over-regulating, or driving it out of the country. I was pretty much hopeless about anything remotely like this to happen until ultra-libertarian candidate Javier Milei won the primary elections last August. It’s now pretty clear he will be the next president. Unfortunately, he’s not super crypto-savvy yet, but I think he will eventually get it (and I’d even be willing to advise him technically if he’s interested). In any case, he has much more pressing problems about to explode in his face at the beginning of his presidential term. Which leads me to the next section.

Why I’m Still Optimistic on Argentina

Even with the bleak analysis I presented above, I’m currently optimistic about Argentina. Part of it is that I believe the country has hit rock bottom, and can only go up from there. Another part is that I’m bullish on Milei’s approach.

I recently read Lee Kuan Yew’s book on the story of how Singapore went from third-world to first-world country, and it gave me a good picture on how a chaotic underdeveloped country with no work culture can be transformed. Interestingly, many of the policies Lee Kuan Yew pushed for Singapore are similar to what Milei is proposing for Argentina. Both push policies largely focused on economic liberalization, strict governance, and reducing government overhead.

(1) Both advocate for an open and liberalized economy. Lee Kuan Yew made efforts to attract foreign investments to Singapore and reduce bureaucratic obstacles, making it a hub for global business. Milei, for Argentina, proposes similar policies, arguing for deregulation, open markets, and minimal state intervention. (2) Singapore, under Lee Kuan Yew, was known for its strict rule of law and zero tolerance for corruption. Milei criticizes corruption in Argentine politics and emphasizes the importance of rule of law. (3) Both seem to share the sentiment that a bloated state can be inefficient and a hindrance to economic progress. Lee Kuan Yew trimmed Singapore’s public services, making them more efficient, like Milei advocates for a smaller state apparatus.

Time will tell if he has the political strength to pull it off, but the cultural revolution that has been going on in Argentina makes me hopeful that he will. Can we see a Latin American miracle in the next decade?

In any case, I’ll be watching this from Uruguay. I’m not interested in living through the chaotic transformation, but I’m now bullish for Argentina. I’m hopeful Argentines can leave behind the culture of no work and living off the state and start taking responsibility for their lives. They have the talent and heart to move upwards in life.

Final Words

Reflecting on Argentina was both a cathartic and painful exercise for me. It’s a country and a culture I both love and reject in so many ways, yet still embrace as my own. Like a dysfunctional family you can’t stop being a part of. I can’t escape the irony that I wrote this post in English. Then again, I always thought of myself as socially Argentine, but my work style was learned from the US.

This is a hot and emotional topic for me, I hope something interesting came across. If you liked what you read, subscribe below!

Acknowledgments

Thanks to Mati and Lemu for feedback on early drafts of this post.
Cover photo by MidJourney

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