BUENOS AIRES — Three weeks after a wave of demonstrations brought him to power, Argentine President Eduardo Duhalde finds his administration at a critical juncture, caught between the demands of millions of his citizens and the expectations of the international finance community.
Every day brings a new protest in a nation beleaguered by unemployment and a banking freeze that has crippled economic activity. Hoping to lift the freeze and jump-start the economy, Duhalde is moving this week to convert billions of dollars' worth of deposits and loans into the nation's devalued currency, the peso.
Until last month, U.S. dollars could be traded 1 to 1 for the peso. About $45 billion in Argentine bank deposits--more than two-thirds of the total--were made in dollars. But with the peso now floating on the open market at about half its former value, the government is saying the banking system simply doesn't have enough dollars to pay all depositors at a rate of exchange that they would consider fair.
Acknowledging that the era of the dollar had ended in Argentina was such an explosive admission that the president first spoke of it Saturday night in an interview with a small news agency here. Depositors would be able to get their money from the banks, Duhalde said, but "not in the currency [the dollar] that isn't there anymore."
The government expects to detail its plan to "peso-fy" the economy in the coming days.
Officials at the International Monetary Fund expressed optimism Tuesday that Argentina is moving forward. The government is counting on more loans from the agency to help the nation out of its four-year recession and fiscal crisis.
"It is legitimate that the Argentines take the necessary time to define a strategy that will last," the fund's managing director, Horst Koehler, said in an interview in the French daily Le Monde. "The IMF is ready to support such an approach."
A delegation from the fund was due in Buenos Aires on Tuesday to hash out a comprehensive rescue plan and to review Argentina's monetary and banking policies, as well as its 2002 budget. IMF officials have said the new policies must be in place before they can deliver an aid package.
Still, as Duhalde's government removes dollars from the economy, it faces the prospect of unleashing any one of a number of nightmarish scenarios.
