Argentines chafe under banking freeze
Thursday, January 10, 2002
BUENOS AIRES, Argentina -- Carlos Lema lined up behind dozens of cash-hungry Argentines pouring into a Buenos Aires bank on Wednesday, fuming over a banking freeze that has choked off access to ready money as the government prepares to let the value of the peso float on the currency market.
"I've spent five hours in bank lines this week," the 28-year-old waiter said. "Five hours! I spend more time in the bank than in the restaurant."
Like countless other Argentines, Lema wants to pay his bills and get his hands on cash.
But a monthlong banking freeze shows few signs of easing after a default, devaluation and days of unrest in the South American nation.
The government set a fixed business rate of 1.4 pesos to the dollar on Sunday, devaluing the currency by 29 percent after a decade of one-to-one parity with the dollar. A critical test of the peso's value is expected today when foreign exchange markets open and the peso floats freely in the marketplace.
Price hikes feared
Many Argentines fear that if the free rate soars, it could unleash price hikes.
Frustrations are rising, too, over the tight banking restrictions first imposed Dec. 1 to stem a run on the country's fragile banking system. Argentines -- their daily routines disrupted by the freeze -- are impatient for the government to give them more access to their money.
Extending the restrictions, economists and analysts say, could risk renewed street protests like those that toppled former President Fernando de la Rua in late December.
"We expect pressure to continue for the government to free up these limits," said John Welch, chief Latin America economist for Barclays Capital in New York. "People want to get their money back."
Local reports said the government would soon raise the current 1,000-peso monthly withdrawal limit -- about $700 at the new official rate -- to 1,500 pesos, or just over $1,000. The government also was reportedly moving to allow Argentines partial access to frozen savings accounts in March.
But the news did little to soothe Jose Bergman, whose 22-year-old son is now backpacking through Europe. He suddenly found himself unable to withdraw money or use his credit cards, problems Bergman blamed on the banking chaos.
"My son can't get money out of the ATM and his credit card keeps getting rejected," he said. "We're hoping some friends in Madrid can loan him money. But with these restrictions, I'm not sure how I can pay them back."
Shortage of cash
Even basic access to cash is not assured.
As part of the restrictions, many Argentines are now forced to have their salaries deposited into a banking system now overwhelmed with many backlogged transactions yet to be processed because of a week of "banking holidays."
"I've been trying to withdraw my salary for the last two weeks but my new ATM card doesn't work," complained Alejandro Cardenas, a 42-year-old sociologist. "And they keep telling us we can spend our money using debit cards, but it keeps getting rejected, too."
The strict limits on cash withdrawals have left many consumers with less money to spend, further paralyzing an economy -- South America's second-largest -- already damaged after four years of recession.
Domestic consumption accounts for more than 70 percent of the economy in Argentina, and everything from auto to shopping mall sales have plunged sharply over the past year.
And those lucky enough to have dollars say they'll hoard them until the new peso rate takes shape, holding off on making any purchases.
"Dollars are too valuable to spend these days," said Silvia Convert, a 42-year-old housewife, as she surveyed the long bank lines.
"I couldn't persuade you to exchange some of them could I?" asked Lema, the waiter, overhearing the conversation.