Wide Support Seen for Economic Reform Program : Argentina Ends Its Bank Holiday

The lines were long and the confusion was almost total, but Argentina’s banks reopened nevertheless Wednesday amid wide popular support for sweeping economic reforms.

A three-day bank holiday ordered by the government of President Raul Alfonsin to allow implementation of his across-the-board attack on inflation ended with higher prices on the stock market and a new currency holding its own against the dollar.

Newspapers published the results of a poll that showed 80% support for the reforms, which include a freeze on wages and prices and a promise by the government to pay its own way without resort to the printing of additional money.

Alfredo Canitrot, the Economics Ministry subsecretary who was one of the authors of the plan, observed: “The response has been extraordinarily good, really surprising. Even people affected by the price freeze are supporting it.”

This confidence seemed to be reflected at the banks, which were dealing for the first time in the new currency, the austral, which replaced the much-devalued Argentine peso.

By early morning, there were block-long lines at some banks, but few people had come to withdraw their savings. Most transactions involved routine deposits, withdrawals and payments for taxes and public utilities.

“I believe it’s going to work,” said Felix Cuadra, a music store owner, as he waited in one of the lines. “I don’t see any other way; I have to believe it will work.”

On Thursday, the last banking day before the reforms were announced, there were runs on some banks, and the peso declined 20% against the dollar on the free market.

The reform offers real interest on savings deposits of 4% a month as an incentive to keep money on deposit.

People at banks Wednesday seemed less worried about the state of the economy than in exactly how their pesos had become australes.

When the banks closed last week, the peso stood at about 800 to the dollar; on Wednesday, one austral was valued at $1.25.

But it will be several months before austral notes are printed. In the meantime, the old peso notes are legal tender--with three zeros snipped off. One thousand pesos are equal to 1 austral.

The reform is much more severe than the austerity traditionally counseled by the International Monetary Fund, which Alfonsin long resisted, and it is intended to control inflation, which had reached a rate of 1,000% a year. How long the emergency measures will be kept in place is not clear, but government spokesman suggest that it will be a relatively short time.

Amid the initial success, some minor pressure is already apparent in connection with the wage and price controls.

Powerful Peronist-controlled labor unions, which applaud the price controls, are demanding a 50% wage increase to counter the loss in purchasing power. At the end of June, workers will get a 22% wage increase, equal to 90% of May’s inflation. There will be no compensation, however, for the June inflation of about 20%.

Government inspectors were patrolling shops in major cities Wednesday to ensure that official prices are posted and observed. Compliance so far has been good but far from universal.

Many merchants spent the weekend putting their prices above fixed levels. A number of shops in the capital have been closed for 72 hours for violating the price regulations, and, in an interior city, a baker’s outraged customers attacked him for overcharging them.