URUGUAY: Crisis May Lead to State of Emergency

By Dario Montero Reprint | | Print |

Darío Montero

MONTEVIDEO, Aug 2 2002 (IPS) - Faced with a deepening financial and social crisis, the government of Uruguay is not ruling out the possible restriction of constitutional rights in its efforts to prevent further lootings after some 14 shops were attacked Thursday evening, and is considering a freeze on fixed-term deposits in state-owned banks.

Hundreds of extra police could be seen patrolling the streets of Montevideo Friday, with logistical support from the military, to prevent lootings like those occurred Thursday at several small shops and a supermarket located in a poverty-stricken neighbourhood of the capital.

The first warning sign that Uruguay might be the scenario for television images of social unrest, similar to those broadcast last December from neighbouring Buenos Aires, came Wednesday, when some 15 people banded together to steal food from a shop near downtown Montevideo.

Police intervention on Thursday saved the 14 shops — including a supermarket, bakery, butcher and pizzeria — from the same fate, but the situation eroded into clashes involving hundreds of people. One young man and two police officers were injured, and some 20 people were arrested.

Interior minister Guillermo Stirling told a press conference that the lootings were “planned and organised [by groups] that seek to destabilise and undermine the standard of living of the Uruguayan people,” though he admitted that he could not identify the alleged instigators.

The police have had information for several weeks that plans were being made to attack businesses, but could not determine the time or the location in which they were to occur, said the minister.

If such incidents continue, according to Stirling, the government has not ruled out the imposition of emergency security measures, an action intended for cases of national or international disturbances, and which limit individuals’ freedoms and constitutional guarantees.

Stirling stated that it is up to President Jorge Batlle to determine whether such measures will be applied. If he does so, the situation would be similar to a state of siege or of emergency, which are covered by other Uruguayan laws.

The commotion comes at a time when Uruguay — a relatively small country with a population of 3.1 million — has become immersed in a profound economic, financial and social crisis, with sharp increases in poverty and unemployment.

The financial turmoil and uncertainties affecting its giant neighbours, Argentina and Brazil, are taking their toll on Uruguay, which for decades has been one of the most prosperous countries in South America in social terms, with stronger education and health services, lower poverty, and more equitable income distribution than others in the region.

The Batlle administration decreed a bank holiday Tuesday and extended it through Friday to prevent the continuation of massive withdrawals. The recently appointed economy minister Alejandro Atchugarry reported that 40 percent of the total deposits had been withdrawn from the country’s banking system since January.

Meanwhile, the international reserves of the Central Bank were depleted at an average monthly rate of 500 million dollars, plummeting from 3.1 billion dollars in December to just 655 million dollars today.

Uruguay’s once strong financial system fell victim to the lack of confidence caused by the recession begun in 1999, the contagion of the Argentine financial collapse, and the alleged fraud committed by the owners of two private banks.

One of these institutions, Banco Montevideo-Caja Obrera, whose owners hold combined dealings in Argentina, Paraguay, Brazil and Chile, was taken over in June by the Central Bank. All transactions have been halted due to the bank holiday, but the bank is on its way to liquidation.

Atchugarry was preparing a legislative bill Friday aimed at strengthening the financial system, which, say political sources, would include freezing the fixed-term deposits held by the government-run Banco de la República and the Banco Hipotecario (mortgage bank).

The restrictions, which would not affect current and savings accounts, could be extended to the private Banco Comercial and the Banco de Crédito, which were already capitalised by the Central Bank in a bid to prevent them from going under. The rest of the private banking entities are expected to be capitalised by their shareholders.

President Batlle announced these decisions Thursday to the principal political leaders and he reported on the negotiations under way with the International Monetary Fund (IMF) for a potential financial bailout.

Batlle held this political summit with his predecessor Julio María Sanguinetti, with whom he shares the leadership of the Colorado Party, another former president Luis Alberto Lacalle, head of the National Party, which is part of the ruling coalition, and with Tabaré Vázquez, leader of the powerful leftist coalition Encuentro Progresista-Frente Amplio.

Uruguay is asking the IMF for the immediate disbursement of the 1.5 billion dollars remaining in a contingency loan of 3.0 billion dollars that the multilateral institution approved in May.

The partial immobilisation of the fixed-term deposits in the state-owned banks would be one of the IMF’s conditions for freeing up the funds Uruguay is requesting.

The government has placed all hopes on the prompt disbursement of funds from the IMF and the possibility of additional aid from the Group of Seven most powerful countries.

United States treasury secretary Paul H. O’Neill said Thursday that Washington is willing now to assist the crisis-ridden nations of Brazil and Uruguay. He is to begin a South American tour on Sunday, with stops in Argentina, Brazil and Uruguay.

Economy minister Atchugarry has acknowledged that no “Plan A” exists, only “Plan B”, which consists of immediate foreign financial aid. Government sources say that if such assistance does not arrive, Uruguay would likely default on its foreign debt.