Five countries where the government confiscated people’s money

The current year is 2022, but the world appears to have regressed at least 30 years. After all, large-scale wars, states with authoritarian measures and, above all, threats of confiscation were once again on the agenda of the newspapers.

Vladimir Putin, President of Russia, stipulated the possibility of confiscation of assets. Before him, the Prime Minister of Canada Justin Trudeau opened the possibility of freezing accounts in the country.

And little by little what appeared to be a Latin American eccentricity reached the so-called “First World”. But anyone who thinks that confiscations or blockades are rare is wrong, as global history is full of this type of measure, as even rich countries have already imposed confiscations at some point.

In today’s text you will know five stories of countries that froze or made direct confiscations of the population’s money.

Cyprus (2013)

In March 2013, the economy of Cyprus, an island country located in the Mediterranean Sea, was in a serious situation. The target was the Bank of Cyprus, the country’s largest bank, which was at great risk of insolvency.

To avoid bankruptcy, the government drew up a plan that was implemented in two stages. The first was the closure of all Cypriot banks, which prevented people from withdrawing money from their accounts. This measure was implemented to prevent a bank run from causing the local banking system to fail.

The second step was the de facto confiscation, which reached all accounts with more than 100 thousand euros. Accounts that were above this amount would have 30% of their funds confiscated. The money would then be incorporated into the bank’s equity, saving it from bankruptcy.

In short, Cypriots had a third of their wealth “donated” to save banks from bankruptcy. But some people managed to avoid confiscation by using a certain orange cryptocurrency. And yes, this was the first time when BTC was used as a protection tool in a crisis.

Corralito (Argentina, 2002)

One of the biggest confiscations in South America turned 20 years old in December 2021. For almost nine years, the Argentine peso was pegged to the dollar, which gave the country a period of stability. In addition, Argentines could use either the peso or the dollar as currency.

However, this parity ended up being compromised by political incompetence until it was completely abolished in June 2001. But it was on December 3 that the famous corralito came into force. On that date, Argentines experienced a complete confiscation of the dollars in their bank accounts.

Briefly, all bank accounts in the country were frozen for 12 months, allowing the withdrawal of only 250 pesos per week. The withdrawal of dollars, on the other hand, was strictly prohibited. Overnight, thousands of people were short of money to buy basic items.

The most serious act, however, was the “pesification” of all dollar deposits, carried out in February 2002. Those who still had dollars in the banks saw them being fully confiscated by the government, which converted all amounts into pesos at the official exchange rate. 1.40 pesos to the dollar. However, the parallel exchange rate was almost 100% higher, which means that Argentines lost money.

These confiscations caused huge protests and looting in the streets and establishments, as well as leaving a strong cultural mark on our brothers. An example of this is that to this day, Argentines no longer keep dollars in banks, and they have become the most open country to cryptocurrencies in Latin America.

Liquidity Crisis in Lebanon (2019)

Lebanon was also affected by a wave of bank account freezes in mid-2019. The reasons were similar to the Argentine case: currency devaluation, high inflation and indebtedness of the Lebanese state.

In September the first major protest took place, and the government promptly responded with drastic measures. As a result, Lebanese banks closed for a period of two weeks, unprecedented in the country’s history.

Later there was a bank reopening, but then came the corralito Lebanese. Dollar withdrawals were completely banned by the government, despite the absence of official capital controls. This led citizens to lose confidence in the Lebanese pound, whose value plummeted within a few months.

In the fourth quarter of 2019, the black market exchange rate hit the 1,600 pounds to the dollar mark. But in April 2020 she was already worth £14,000. As the dollar was widely used in the country, the restriction affected local commerce. Around 785 restaurants and cafes closed between September 2019 and February 2020, resulting in the loss of 25,000 jobs.

Inflation, on the other hand, has risen to 580% since October, resulting in the worst economic crisis in decades. In March 2020, Lebanon announced the first debt default in the country’s history.

United States (1933)

As the world’s largest economy, the US enjoys the status of a good payer – the AAA seal, as classified by risk agencies. So it would be absurd to imagine that this country would default, right? Just not.

In fact, the US has already defaulted on its history. This was on April 5, 1933, when the country was still living on a gold standard. American citizens could keep both dollars and gold in their homes or in banks.

That year, the government issued the famous Executive Order 6102, which required all citizens of the country to hand over their gold to the government. In return, the government would pay them $20.67 per troy ounce, which is 31.1 grams of gold.

After the gold confiscation, the government devalued the dollar through inflation, causing the price of the troy ounce to rise to US$ 35. In practice, there was a confiscation both direct (the taking of the gold itself) and indirect (devaluation of the dollar ). The possession of gold by citizens was prohibited and criminalized, something that was only revoked in 1975.

Collor Plan (1990)

Finally, the most famous example was implemented during the Fernando Collor de Mello government in Brazil. That’s why the plan was also known by the infamous name of Plano Collor.

These plans were intended to combat the high inflation that plagued Brazil in the 1980s and 1990s. The most destructive of these plans was Collor I, implemented on March 15, 1990, which stipulated the famous confiscation of savings.

The Collor Plan was composed of nine measures, but the three most famous were the following:

• Currency replacement, cruzado novo in the rate of 1000 cruzados = 1 cruzado novo;
• 80% of all deposits from current accounts or savings accounts exceeding NCz$50,000 (new Cruzado novo) were frozen for 18 months. During this period, deposits would receive a return equivalent to the inflation rate plus 6% per annum;
  
• Creation of the IOF (Tax on Financial Operations), which would be levied on all financial assets, transactions with gold and shares and on all withdrawals from savings accounts.

With the freezing of accounts, thousands of Brazilians were left without access to their money, which many depended on to survive. The measure was catastrophic and caused the death of thousands of people, many of whom committed suicide.

To top it off, inflation was only partially appeased, but then it returned even stronger than before. The frozen money was never fully returned, and several refund requests are still pending in court more than 30 years later.