Free-floating peso debut delayed in Argentina

Thursday, February 7, 2002

BUENOS AIRES, Argentina -- The Argentine government postponed Wednesday's scheduled debut of a free-floating peso until next week, buying more time as it tries to reform an economy nearly four years into a nosedive.

Economy Minister Jorge Remes Lenicov said Argentina will fully float its peso Monday, a move sure to be closely watched as the government does away with the country's dual exchange rate.

Remes Lenicov would not predict where the peso might settle, but said he expected it to fare well. "It's going to be a good opening," he said.

However, he said the move to an entirely peso economy is expected to make gross domestic product shrink at least 4 percentage points this year. As a result, the government estimates the roughly $260 billion economy will shrink 4.9 percent by the end of the year.

Dollars converted

President Eduardo Duhalde moved to scrap the peso's longtime one-to-one peg with the U.S. dollar four days after he took office last month. He set an official rate of 1.4 pesos per dollar for limited export and import transactions, but allowed the peso to devalue nearly 50 percent on the open market where it now trades around 2-to-1.

Under Duhalde's economic plan, all bank deposits denominated in dollars will be converted to pesos at the government-set rate of 1.40 per dollar. Bank loans denominated in U.S. dollars will be converted into pesos at a rate of one-to-one.

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