January 11, 2002
Rioters ransacked banks, destroyed ATM machines and set fires across downtown Buenos Aires early Friday after a night of street protests against a government freeze on bank deposits turned violent. The latest protests came after a largely peaceful nighttime demonstration by thousands of middle-class Argentines demanding access to savings trapped in accounts. The government partially froze accounts on December 1 to stop a run on the banks and announced measures to put a tighter grip on the financial system Thursday. Rowdy gangs of youths rampaged on the fringes of Friday night's demonstration, where Argentines banged pots and pans and demanded their savings back. Riot police used tear gas to disperse the marauding gangs.
The demonstration was the first popular protest against the government of Eduardo Duhalde, who took office on January 2. Argentina's last elected president, Fernando de la Rua, was driven from office in December amid deadly street riots and a massive economic crisis that pushed unemployment above 18 percent.
Government floats peso
Meanwhile, the peso was traded freely for the first time in 10 years Friday, when a 3-week-old ban on foreign exchange transactions expired. Because of a shortage of pesos caused by the banking freeze, the floating rate was just slightly weaker than the official rate of 1.4 pesos per dollar -- settling in an early range between 1.5 and 1.6 Friday morning. The government last week ended the peso's peg of one-to-one to the dollar, easing the rate to 1.4 for imports, exports and large-scale business transactions. But ordinary Argentines must now buy dollars on the open market in a dual-rate system.
On the streets, Argentine depositors formed long lines outside shattered banks to see if they could get their hands on any of their savings. They had expected the restrictions on bank withdrawals to be ended Thursday and were enraged by the further clampdown. "They promised us our money. Let's see!" said a middle-class housewife, Graciela Herrera, who stood in a long line outside a vandalized branch of Banco Frances. Only one of the facade's 10 large plate glass windows was left intact and all three automatic teller machines were trashed.
She failed to get any of her savings. As she left the bank, she said, "There are only pesos, there are no dollars."
New restrictions on bank withdrawals
New restrictions announced Thursday include a measure converting checking accounts with over $10,000 and sav ings accounts with over $3,000 into fixed-term deposits -- meaning depositors cannot withdraw from them for at least a year. Argentines were already frustrated by limits on the amount of money they can withdraw from their accounts each month, a restriction that has been in place since December 1, when panicked depositors yanked $2 billion from banks in a single day.
The new floating rate is seen as a test for Duhalde's economic plan to end nearly four years of bitter recession that pushed Argentina into defaulting on its massive $141 billion public debt. A runaway free-floating rate could spell disaster, heralding a return to hyperinflation that scourged the economy in the late 1980s.
Streetsweepers in Buenos Aires cleaned up the broken glass and began boarding up bank windows and wiping away spray-painted slogans against the government and the banking freeze. The destruction trailed away on elegant boulevards leading from the Casa Rosada government house, the main focus of overnight protests. "Banks, give us our money now!" and "Duhalde, thief!" the slogans read. Thursday's protest turned violent as riot police fired tear gas and rubber bullets at dozens of lingering demonstrators. There were no immediate reports of injuries.
"We want our money and we want it now!" shouted Ruben Orlando, a 46-year-old doctor who beat trash can lids together during the protests.
The latest protests cast a shadow over Duhalde's efforts to drag South America's No. 2 economy out of its tailspin. The government hopes the devaluation will boost exports and increase investment in the ailing economy. Analysts say the peso's ultimate worth will depend on the government's ability to devise a credible economic plan, balancing the budget and winning back support from the International Monetary Fund. The mere possibility of soaring prices has made some Argentines nervous. Many have fresh memories of the late 1980s, when a devaluation of the previous currency triggered runaway inflation and price hikes.
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