Argentina to partially lift freeze on deposits

Nation also to end peg of peso to dollar

bank holiday is declared

February 04, 2002|By KNIGHT RIDDER/TRIBUNE

BUENOS AIRES, Argentina - The government of embattled President Eduardo Duhalde unveiled a plan last night to partially lift the freeze on bank deposits that brought residents into the streets, toppled two presidents and has virtually paralyzed business activity in Argentina for two months.

Economic Minister Jorge Remes Lenicov also told Argentines yesterday that the peso would trade freely against the dollar. The government is abandoning the dual exchange rate system it announced just weeks ago, when Argentina ended a decade-old policy of pegging the peso's value to the dollar's.

Fearing a potential run on the country's banks, Argentina's central bank declared a bank holiday until Wednesday so banks, businesses and depositors can digest the complicated new rules.

"There are no magic formulas, no immediate solutions. This is a process," Remes Lenicov said.

Departing from a national habit of blaming others for the country's troubles, he told Argentines that they and their leaders are to blame after a decade of runaway borrowing.

"For many years we have lived off loans," the economic minister said, noting that Argentina owes the equivalent of a year of its gross domestic product, the broadest measure of an economy's goods and services.

Argentina ended 2001 with a $10 billion deficit, and this year is expecting a deficit of $3 billion and a 5 percent contraction of GDP.

Remes Lenicov said recovery "depends on us and the comprehension and help of the international community," which he said would be directed toward social programs, noting that 15 million Argentines, almost half of the country's 37 million people, live below the poverty line.

He ruled out printing more money to cope with the crisis. "We cannot and will not print new bills," Remes Lenicov said, noting the treasury will be authorized to print 3.5 billion pesos in 2002. "The treasury will have to better its collection, reduce costs" and live within limits.

President Bush and the International Monetary Fund have repeatedly called for a sustainable economic plan before bankrupt Argentina can receive emergency assistance. The Duhalde government is hoping yesterday's steps and the expected approval this week of a new budget will be enough to win $15 billion in new lending.

Argentina's crisis deepened this weekend after the supreme court ruled that the freeze on bank deposits that the government enacted Dec. 1 is unconstitutional. That unexpected decision late Friday forced a one-day delay in the new economic plan and heightened fears that banks could collapse if they were ordered to return at once the roughly $61 billion deposited in the nation's banks.

"It is impossible, there is not liquidity in the system to return or cover all the deposits simultaneously," Remes Lenicov said.

Duhalde said he would respect the court's decision. But in his speech, Remes Lenicov called it "irresponsible," and under the new economic plan, Argentines will be able to withdraw all their money only from accounts in which pensions and salaries are deposited.

People with time deposits, which are similar to certificates of deposit in the United States, cannot withdraw cash but will be given savings certificates that they can use to buy expensive items such as cars or real estate, or to pay down debts.

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