Argentina Postpones Currency Devaluing

Reinforcing the impression that his government is still struggling to find ways out of Argentina’s financial mess, new President Eduardo Duhalde postponed for a second day Wednesday the reopening of currency-exchange businesses and the debut of the devalued peso.

Duhalde, who took office Jan. 2 as the country’s fifth president in two weeks, also was hit with criticism from a prominent member of his own Peronist party as former President Carlos Menem called the new chief executive “inept” and described the devaluation and other measures as “the worst.”

After Congress granted Duhalde sweeping emergency powers, his government announced a 28% devaluation Sunday and said it was abandoning the peso’s 10-year parity with the dollar. He confirmed that Argentina is defaulting on $135 billion in public debt and continued restrictions on bank savings withdrawals, which since Dec. 3 have been limited to 1,000 pesos a month.

Although this capital city was quiet Wednesday, the nation waited nervously for the new official exchange rate to take effect at exchange houses and banks, which have been forbidden to exchange money since Dec. 21. Wednesday’s inaugural date for the devalued currency was pushed to today, and now to Friday.

Tensions boiled over in the provincial capital of Cordoba, where government employees who haven’t been paid in weeks clashed with police.

A government official who asked not to be identified said Argentina hopes to open discussions with the International Monetary Fund on a possible debt renegotiation and aid package in 15 days, after details of the government’s new monetary policy and its 2002 fiscal budget were determined.

The official said Argentina has no intention of repudiating its debt. “The president didn’t say, ‘I am not going to pay.’ He said that we cannot pay,” the official said.

Economy Minister Jorge Remes Lenicov told reporters Wednesday night that although the government wants to eliminate withdrawal restrictions, it cannot because there isn’t enough cash in the banking system to pay depositors. Withdrawals by nervous Argentines last year totaled $20 billion, equal to one-quarter of all accounts and half the federal budget.

In an interview with the Chilean newspaper El Mercurio, Menem accused Duhalde and Carlos Ruckauf, his new foreign minister, with promoting the public demonstrations that helped force President Fernando de la Rua from office Dec. 20. Ruckauf was Buenos Aires provincial governor at the time.

After Lenicov announced to reporters the postponement of the new currency measures for another day, he did not take questions, respond to Menem’s charges or address published reports that dollar savings accounts would be frozen and inaccessible to savers until next year.

He reiterated Duhalde’s promise that Argentina will not “confiscate” or automatically convert dollar accounts into devalued pesos.

The government also agreed to raise the monthly limit of withdrawals on salary accounts to as much as 1,500 pesos, which covers 96% of all salary accounts.

The savings account measures have been highly unpopular, causing demonstrations and some violence. But Lenicov said the only other option is to force borrowers to pay off loans early, which in turn would cause bankruptcies and job losses.

“We want to disarm the restrictions, but under these circumstances we want to do it with the highest prudence,” he said.