MercoPress. South Atlantic News Agency

Argentina to return dollar deposits to account holders

The Argentine government announced a plan Thursday for the gradual return of dollar-denominated bank deposits effectively frozen since the devaluation of the peso in January 2002.

Economy Minister Roberto Lavagna said the plan involved deposits worth some $9 billion that were originally converted to pesos at a rate of 1.40 pesos to the dollar. By order of President Eduardo Duhalde, the new system will be implemented through an emergency decree, which "could be ready" next week, according to Lavagna, and through a bill which will be submitted to Congress.

The problem dates from January 2002, when Argentina abandoned its decade-old policy of maintaining the peso at parity with the U.S. currency, and dollar-denominated bank accounts were converted into pesos at the rate of 1.40 to the greenback.

But the local currency plummeted, losing two-thirds of its value against the dollar, and now stands at 2.89 to the greenback. This situation prompted bitter complaints from account holders who felt they had been robbed of much of the value of their original deposits.

Under the plan outlined by Lavagna, deposits of up to $30,000 will be returned by the bank in cash, at the rate of 1.40 pesos per dollar, with an adjustment for inflation. Account holders will be offered an additional amount, bringing the total sum into line with prevailing exchange rates, in the form of dollar-denominated government bonds with 10-year maturities.

Deposits of more than $30,000 will be returned as fixed-term certificates maturing in 90-120 days, with account holders again having the option of receiving bonds to compensate them for the fall in the value of the peso since the original conversion.