Argentines Continue Withdrawing Cash

Argentines flooded banks Saturday, worried that their savings could be vaporized unless the crisis-racked government succeeds in a high-stakes mission to coax more cash from the International Monetary Fund.

Argentine Economy Minister Domingo Cavallo met behind closed doors with officials from the IMF in Washington to persuade them to unlock $1.3 billion in frozen aid that Argentina needs to pay its heavy debts.

Both sides described Friday’s meetings as positive, but Cavallo warned reporters not to expect any breakthroughs over the weekend as Argentina tries to cheat or at least postpone disaster yet again amid a deep recession in its fourth year.

Back in Buenos Aires, Argentines were taking no chances, betting that the IMF--reportedly fed up with Argentina’s runaway public spending--would refuse to provide the funds and send the country tumbling into financial ruin.

Analysts say that, without the IMF money and with almost all other sources of financing cut off, cash-strapped Argentina could buckle under the weight of years of budget deficits and default on its $132-billion public debt.

That meltdown could then lead Argentina to devalue its peso currency, which would spell instant bankruptcy for thousands in Latin America’s third-largest economy, most of whom are indebted in U.S. dollars.

“I’m not taking any chances,” said Sonia Verbitich, a 52-year-old homemaker, as she waited in line at a cash machine Saturday. “I’ve seen crises before, but this one looks really bad, so I’m taking out as much cash as I can.”

Most large banks worked overtime Saturday, staying open for extra hours to attend to jittery customers.

With depositors growing dizzy from the country’s roller-coaster financial crisis, Argentine banks have seen deposits decline about 17% this year. More than $1 billion left the system in just one day this month.

That run led the government to slap strict limits on bank withdrawals, limiting Argentines to $250 a week in cash withdrawals for the next 90 days until Cavallo can sort out the country’s debt problems with creditors.

The tough rules slowed withdrawals, but at a steep price: The ensuing cash crunch has frozen consumer spending, with retail sales down as much as 80% last week compared with the week before, a merchants group said Saturday.