ECONOMY-ARGENTINA: Savers Dream of Greenbacks Once Again

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Mar 5 2003 (IPS) - Some 400,000 Argentines with dollar deposits frozen in the banks since late 2001 now have a stronger legal basis to demand the return of their balances in the original currency, following a Wednesday court ruling that declared the obligatory conversion of those accounts to pesos unconstitutional.

After months of debate, the Supreme Court of Justice issued the decision that the government feared most: a ruling in favour of the province of San Luis.

Since December 2001, the government of the western province, home to 360,000 people, has not been able to touch the 247 million dollars deposited in a branch of the state-run Banco Nación.

At that time, the balance was the equivalent to 247 million Argentine pesos, in virtue of the "convertibility" law that pegged the peso to the dollar at one-to-one parity for more than a decade.

But in December, the government halted bank withdrawals, and in January 2002 the national currency was devalued to 1.4 pesos per dollar.

Then came the so-called "obligatory peso conversion" of accounts held in dollars, at the 1.4 peso-dollar rate.

But account holders were still unable to touch their savings. The government announced that the money would be returned beginning in 2005, in instalments. Meanwhile, the peso continued to depreciate.

By mid-2002, when the dollar was buying 3.8 pesos, the 247 million dollars of San Luis province could have been exchanged for around a billion pesos.

Now, the court has ordered San Luis and Banco Nación to negotiate how and in what timeframe the deposit will be returned. The two parties have 60 days to come up with a plan. If they fail, the court itself will decide how the provincial government will be compensated.

President Eduardo Duhalde said last week that the judges "are trying to govern" the country, alluding to the economic instability that Wednesday’s ruling could provoke. The court ruling "will be a heavy blow to the Argentine economy," Felipe Solá, governor of Buenos Aires province, commented after learning of the court decision.

Although the ruling is limited to the San Luis case, the arguments lay the groundwork for all savers with dollar accounts to turn to the courts to get their money back in that currency and not in pesos, as the state had aimed in its peso conversion decree.

Under the Argentine legal system, a Supreme Court ruling does not set precedent.

Each account holder would have to begin the legal process in the lower courts, and it is unknown if they would obtain their holdings in cash or bonds, or if they would be paid back some years down the road.

Banco Nación already attempted the latter alternative, offering San Luis its dollars, collectable in 2012.

The Supreme Court of Justice ruling was approved by five judges, with the three others voting against it.

This marks the end of the lawsuit initiated by San Luis governor Alicia Lemme, who refused from the beginning to accept the obligatory conversion to pesos of the province’s treasury holdings. She kept pushing the case until it reached the highest court.

Lemme spent Tuesday night at the Supreme Court building, awaiting the decision to be announced Wednesday. Upon hearing the decision, she said it is "an important victory for the people of San Luis and for the savers. The basis of the ruling reverses the peso conversion decree."

In its ruling, the Supreme Court states that the decree is "unconstitutional", a declaration sought by some 400,000 dollar account holders who are still affected by the "corralito" (little fence), the freeze that the government imposed in December 2001 to halt a run on the banks.

Most have deposits that are slated to be returned in instalments and in pesos. Half of the savers had filed with the courts for legal protection of their property rights, as guaranteed by the Argentine constitution.

But of the 200,000 claims filed, the courts so far have only processed 20,000.

Associations of account holders are celebrating Wednesday’s ruling. "God enlightened the ministers of the Supreme Court to halt the biggest robbery ever to be perpetrated against the Argentine people," said one man, after singing the national anthem with a group of fellow savers.

Next to him, a woman said the court decision has put an end "to the damned ordeal of the savers," while another woman noted that the success of the San Luis governor "is an example which shows that if we Argentines fight for our rights, our rights will be respected."

"The court has validated legal security in affirming that private property is inviolable and no Argentine can be deprived of that right," said an emotional Nito Artaza, actor and leader of a savers organisation.

"Never again will a government tread on our rights," he stated.

The account holders who are most active in defence of their money continue to stage three demonstrations each week in the banking district of Buenos Aires and in other provincial capitals.

Their actions are a carry-over from the "caceroleos" – the massive pot-banging protests that began with the explosion of the economic crisis in late 2001, when angry savers painted slogans on bank façades and walls.

Wednesday’s court ruling and its potentially broader consequences could cost the banks more than 8.0 billion dollars, according to Central Bank calculations.

That is the sum that the banks will demand from the Argentine state in compensation for the changes in the rules of the game, such as the currency devaluation and the obligatory conversion to pesos.