In an unexpected statement, the national Minister of Economy announced on Thursday the end of cash curbs. However, the Chief of Cabinet said Friday the case was under study.
A routine press conference was expected for Thursday at the Ministry of Economy. However, Roberto Lavagna, the Minister, announced the end of the controversial banking freeze on long-term certificates of deposits imposed in December 2001. However, Alfredo Atanasof, the Chief of Cabinet, said on Friday that the case was still under study.
Apparently, the normalization of the Argentine financial system is still a delicate issue and creates controversies within local authorities. Probably, President Duhalde will pass the new ruling soon, but there is still a strong opposition from the banks if they are not compensated.
Lavagna said the measure would initially target CDs of up to 42,000 pesos (14,500 dollars), which would be repaid partly in pesos and partly in long-term bonds. The banks will pay 2.05 pesos per dollar deposited and the balance to reach the market value of the foreign currency would be afforded by the National Treasury through those bonds. During the decade of parity between the peso and the US Dollar, Argentine savers gave pesos to the bank and they were automatically converted into dollars by the financial institutions, according to the legislation.
After the financial turmoil of December 2001, the Government froze savings to avoid a financial crack. The ruling touched off riots and widespread looting which left 30 dead and brought down President Fernando de la Rua and his government.
The new government ordered devaluation and converted all the cash existence into pesos. However, while mortgages and loans remained in pesos one to one, deposits had a different treatment as savers insisted on getting their deposits in Dollars, despite today one dollar buys three pesos.
Therefore, the proposal pushed forward by Lavagna is a kind of negotiated way out of the situation. But the banks want to be compensated because they have to pay their debts in 2.05 pesos per dollar and they get paid from debtors one peso per dollar. This is the key issue. Lavagna proposed a compensation to be agreed by the Congress, but the banks are afraid this won't be beneficial for them. The Supreme Court is widely expected to rule in favor of the depositors, ordering them to be repaid either in dollars or at the current exchange rate. Congress also is to decide on compensation banks are demanding to make up for their losses when the government briefly adopted a two-rate exchange system after abandoning dollar parity.
"The compensation the banks are seeking represents a lot of money," said presidential spokesman Luis Verdi. "We are determined to ensure this does not halt the process of economic recovery," he said. It also important to keep in mind is that Argentina defaulted to its foreign debt and cannot keep on getting more debts any longer. Even more, the IMF presses Argentina to pay in time as much as it can.
This is the main discussion within the national government. However, everything can be revised in two months, when the new authorities will take office.
Hernan Etchaleco PRAVDA.Ru Argentina
Photo: Roberto Lavagna, Argentine Minister of Economy.