Don't cry for Argentine banks


SAN JOSE DEL RINCON, Argentina - Probably because it is so small, or because too few people here have much money, this riverside town has no banks, no savings and loans, nothing of that sort.

We are grateful. We have not had our peace disturbed by those who every day bang cooking pots outside the offices of savings institutions in the provincial capital, Santa Fe, about 10 miles down the road, and everywhere else throughout Argentina. This metallic cacophony is occasionally accompanied by violence, and always by an inventive variety of insults against bankers and politicians, provincial and national.

For these, the pot-bangers believe, have been the agents of the country's financial disintegration. They have every justification to raise a racket, most everybody agrees. The banks have their money, their dollars and pesos, and the government has told them not to give it all back, only dribs and drabs. The rules are changed all the time.

Right after he came into office, President Eduardo Duhalde (chosen by a confederacy of politicians to serve out the term of President Fernando de la Rua, who resigned when Argentina defaulted on its $141 billion public debt last month) promised that people would eventually have their money returned in the same currency they deposited in their savings accounts and certificates of deposit, or whatever.

Later, he acknowledged that the dollars "aren't there." He then promised that those who had dollar accounts would not see the buying power of their savings shrink: The government would exchange them for their equivalent in pesos; the accounts would be "peso-fied."

But the concept of equivalence is fluid these days. The official exchange rate stands at 1.4 pesos to the dollar. In the free market on the street, it goes two to one, or less. By this time, many people don't expect to see their dollars again, though some continue to hope.

This situation, the freezing of all this money, is called the corralito, an apt designation if ever there was one. The people's money has been corralled, the way horses are corralled, and the stingy gatekeepers, the bankers, are just following orders. The justification for seizing the savings of millions of Argentines - the equivalent of about $70 billion, according to a recently published estimate - has been to prevent a run on the banks, to save the system.

A spokesman for Duhalde says that about $24 billion fled Argentina between March and December of last year. Recently, a woman was arrested at Ezeiza International Airport in Buenos Aires trying to smuggle $70,000 out inside a fuzzy teddy bear. She was caught, but one wonders how many other teddy bears made good their escape. (Corralito also refers to a child's playpen, a definition more useful for the ironists who demand that they be let out of the playpen because they are adults, the money is theirs, they know best how to use it. It is a withering argument.)

The withdrawal of this money from circulation has exacerbated the recession. More businesses are failing for want of liquidity, for want of clients to buy their goods and services.

The unemployed, some of them, find new ways to put beef on the table. In the shadow of a yellow convent full of pious nuns stands a short line of cars whose drivers will take you all the way into Santa Fe for a peso and a half, gypsy cabs. This is about the fare charged by the bus company, which could go out of business if this keeps up, thus deepening our isolation in this quiet, flowered place.

Another consequence of the lack of currency to oil the wheels of commerce is the emergence of scrip - temporary paper money issued by provincial governments to meet expenses. These variations emerge with colorful names, such as the paticone, issued by Buenos Aires Province, the quebracho (wood) from Chaco Province. Here in Santa Fe, the lecop just made its appearance, though santafecinos insist that it is a national scrip, spendable outside the province. Well, maybe.

People are not eager to have the lecop, but nobody's turning it down. Because of it, provincial employees are finally to receive last year's aguinaldo, the traditional extra month's pay owed to most Argentine workers.

Eighty percent of it will come in lecop. There is one problem: With lecop you can buy anything, pay your bills, taxes, etc. But you have to spend each denomination to its limit: Merchants are refusing to give back change in pesos. Eventually the lecop and all its siblings will go the way of the argentino, that stillborn idea for a third national currency (in addition to the peso and the dollar) that came and went during the brief presidency of Adolfo Rodriguez Saa, after the departure of de la Rua. The trick will be to get stuck with as little as possible of this funny money after the economy rights itself.

As for now, it might be said that Argentina's romance with the Yankee dollar has reached its sad end. Many people would probably be happy to be out of the corral, and in possession of their wealth, even if in a diminished peso state.

It might be said that the dollar has been a curse on Argentina. Its utterly free circulation here, its enforced equality with the peso, encouraged many Argentines to persuade themselves that they were rich enough to jet off to Cancun, Mexico, on a moment's notice, rich enough to contract debts in dollars for cars and houses they cannot pay off. It was a spell, a dream that turned into a currency nightmare.

It has always been an article of faith here that in every economic crisis that besets Argentina, somebody gains as most people lose.

At this point, it's not too hard to perceive the gainers in the current mess: On Jan. 22, the newspapers here reported a sudden and dramatic rise in the value of bank stocks, in one case (a Spanish bank) up by 51 percent.

Richard O'Mara is retired from The Sun, where he served as a correspondent in London and Rio de Janeiro, and as foreign editor. He spends time every year with his family in Argentina.

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