MercoPress. South Atlantic News Agency

Conflict fears make Argentine savers opt for US dollars

Another corralito in Argentina?

Seven out of ten Argentines with savings in the banking system have been changing their options from local pesos to US dollars or other currencies or assets, fearing the consequences of the unresolved farmers' conflict could lead to a run on the banks and the government's response of freezing assets, according to some Argentine media.

The "corralito" or freezing of bank deposits and assets is still fresh in the memory of Argentines who recall the 2001/02 melting of the Argentine economy and default which devoured at least four presidents in just over a week and plunged over half the population below the poverty line. "There are a lot of rumors and interested parties which has more to do with the political conflict than with the economy. There are no more or less economic problems than a few weeks ago. Some people are trying to scare holders of bank deposits", said Miguel Bein a former Deputy Economy minister. Fears about a new "corralito" surged last Wednesday when a massive e-mail titled "Another corralito in Argentina" was spammed all over the web. According to one of the media reporting the incident, Critica, 60% of fixed term saving were renewed but half of them (30%) opted for US dollars. Another 15% directly changed pesos into US dollars and took the money out and 10% changed to money to current accounts. Another 15% opted for investment funds or bonds but all issued in US dollars or other strong currency. Argentine cabinet chief Alberto Fernandez when asked about the situation said that "Argentina currently has the best macroeconomic conditions in the last ten years". However the Argentine Central bank during the last week had to sell an estimated 170 million US dollars, which is something exceptional "since at this time of the year the Central bank is a net buyer to the tune of 150 million US dollars per day". The price of the US dollars jumped 5 cents to 3.26 pesos, and in some branches in middle class neighborhoods clients wouldn't even be tempted with higher interest rates. The situation was further complicated by the fact that the aircraft bringing freshly printed bills from the US Federal Reserve was unable to land in Buenos Aires because of the Chaitén volcano ashes. The Argentine Central Bank international reserves currently stand at 50 billion US dollars. However 78% of Argentines surveyed believe the government must eliminate the March increase in export taxes which triggered the long conflict with farmers.