Argentina president mulls government sale

Posted 8:00AM on Tuesday 14th May 2002 ( 23 years ago )

BUENOS AIRES, ARGENTINA - For months, President Eduardo Duhalde has sought ways to defuse what he calls Argentina's ``ticking time bomb'' - a widely despised banking freeze that has penned up people's savings. Now he's considering a more radical idea to help cool some of the anger over Argentina's economic crisis, floating the prospect of letting people use their trapped funds to buy government-owned land, furniture, cars or even railroads. ``The state has thousands of properties and millions of acres of land that it doesn't use,'' Duhalde said Monday. ``We should study how we can compensate people's savings with the state's property.'' The announcement is the latest in a series of proposed solutions to the five-month-old freeze, imposed last December by former Economy Minister Domingo Cavallo to help preserve the creaking financial system. Duhalde said he ordered economic officials to seriously consider the proposal and he expected to fully analyze it after returning from a trip to Spain later this week. But the idea of selling off - or even swapping property for savings - highlights just how nettlesome the issue has become for the president, who is struggling to steer Argentina through a crisis that includes a steep devaluation of the peso and a default on the nation's foreign debt. Duhalde must balance protecting the banks that form the backbone of any modern economy against the increasing restlessness of cash-hungry Argentines, who could dictate the length of his time in office. The nation saw a revolving door of five presidents in a two-week period last December and January. Thousands of Argentines have held nearly daily protests against the ``Corralito,'' the strict limit on cash withdrawals. Depositors, their money trapped in the banks, have seen their savings dwindle as the peso has lost about 70 percent of its value against the U.S. dollar. Many savers had their money deposited either in dollars or pesos when the local currency was pegged one-to-one with the U.S. currency. But those accounts have been forcibly converted into pesos, many at an exchange rate that today stands at half of what it was at the time of the conversion. ``It keeps getting worse,'' said Carolina Cervetto, whose $220,000 in savings now are worth about $102,000. ``First they wanted to give me government bonds, now they want to give me some run-down government building. I just want my money!'' But banks say they don't have the funds to return to depositors if the banking freeze is unilaterally lifted. Much of the money has been used for loans, they contend. Other banks simply aren't liquid enough to survive a lifting of the freeze - raising fears of a collapse of the banking system. Moreover, the freeze has prompted a showdown between Duhalde and the Supreme Court, which has twice ruled it unconstitutional, paving the way for thousands to legally - and successfully - challenge the restrictions. Huge withdrawals by Argentines using court orders have pushed the banking system closer to collapse, the government says. With confidence in the banks so low, few people are depositing money. One economy minister has already resigned over a failed attempt to resolve the freeze. Jorge Remes Lenicov called it quits three weeks ago after a plan to convert the trapped savings into government bonds quickly lost congressional support amid swelling street protests. Duhalde said he was seeking the advice of both savers and banks as he searched for a solution to the ``Corralito.'' ``I've met with groups representing savers at least three times, and I've met with the banks,'' he said. ``We're looking for a way out - but it isn't easy."

http://accesswdun.com/article/2002/5/194719