MercoPress. South Atlantic News Agency

Uruguay Calm as Banks Reopen

Uruguay is to repay Washington later this week after receiving a loan package in the same amount from the International Monetary Fund (IMF), the World Bank and the Inter-American Development Bank (IDB).

The aid is intended to help Montevideo surmount the worst financial crisis in the history of a country once known as the "Switzerland of Latin America" for its apparent prosperity and stability.

Scores of people lined up Monday morning at the doors of the central bank and branches of the state-owned Banco de la Republica Oriental - the country's largest - several hours prior to the traditional opening time of 1:00 p.m (1600 GMT).

Bank customers waited peacefully in line, while authorities deployed additional security forces to patrol Montevideo's financial district in efforts to prevent a recurrence of the violence seen during last week's looting of stores and supermarkets.

Customers also lined up to access automated teller machines (ATMs), many of which were quickly depleted of cash.

Over the weekend, Uruguay's Congress rushed to approve an initiative to strengthen the banking system that includes denying depositors access to long-term deposits at Banco de la Republica Oriental and Banco Hipotecario, also state-owned, for three years.

The long-term deposits are akin to U.S. certificates of deposit, and the account holders will receive higher rates of interest to partially compensate them for the freeze.

Most private banks, which are not affected by the new plan, opened their doors two hours ahead of schedule, setting up separate lines for teller windows so other operations would not be obstructed.

Within two hours of opening, the main branch of one bank had paid out "20-25 percent of the (day's) usual cash flow,"

Other banks, however, imposed their own restrictions on withdrawals, including Lloyds TSB, which notified customers the daily ATM cash withdrawal limit had been slashed in half, and that only the bank's proprietary ATMs would provide them access to their accounts.

Four of the 22 banks in Montevideo's financial district remained closed by order of the central bank.

Banco Comercial and Banco de Credito, both partially state-owned, remained closed due to a lack of liquidity, although their employees reported to work.

Banco Montevideo and Caja Obrera, which the central bank took over last month, also remained closed, but their downtown branches were notably devoid of activity.

On Friday, Wilson Sanabria, legislator for the governing Colorado Party, said "it is almost a done deal" that Banco Montevideo and Caja Obrera, which are owned by the Velox Group, "will be liquidated." Meanwhile, the country's exchange houses conducted business as usual, with the bidding price set at 22 pesos to the dollar and the asking price set at 28 pesos to the dollar, as in the weeks prior to the banking holiday. In some exchange houses, the volume of operations was surprisingly less than usual, according to employees.

Contrary to most expectations, an influx of Argentine clients did not assail the banks once they opened for business, despite the fact that most of Uruguay's foreign account holders hail from the beleaguered neighboring nation.