Argentina is to tighten controls on its banking system in a desperate attempt to shore up financial stability after the announcement of a 29 per cent devaluation of the peso on Monday. The Argentine authorities announced on Thursday that the currency markets would reopen on Friday.
In the toughest action yet, dollar fixed term savings accounts are to be frozen for at least a year. “The banks don’t have the money to meet a massive withdrawal of deposits,” said Jorge Remes Lenicov, economy minister.
The controls will be very unpopular among middle class Argentines and will further complicate the political challenges facing President Eduardo Duhalde, who took over earlier this month after popular protests toppled two previous governments within three weeks. Bank controls were initially imposed in December as nervous savers withdrew money. Remes Lenicov said last year’s decline in bank deposits of S20 billion was equal to half the country’s national budget.
The new measures convert current and savings accounts to fixed-term accounts but allow holders of current accounts of less than $10,000 to convert dollar savings to pesos at the official 1.40 pesos to the dollar rate, or withdraw $500 a month. Peso savings accounts will be frozen as well but only until the beginning of March, said Rem Lenicov.
He insisted there would be no “confiscation, trimming’, or short-changing” and said the monthly limit on withdrawals was being increased from 1,000 pesos to 1,500 pesos for workers whose wages are paid into their accounts.
However, Argentina’s prolonged bank holiday, which has left banks and exchange houses open for only limited operations all week means savers have no clear idea what the local currency is worth.
Source: The Business Standard, January 12, 2002.
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