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Argentina: Food Emergency as Gov't Looks into Capital Flight

by Marcela ValenteInter Press Service
January 16th, 2002

BUENOS AIRES -- The Argentine government declared a food emergency Wednesday as demonstrations intensified outside banks in several cities in protest against strict banking curbs. The justice authorities, meanwhile, began investigating reports of massive transfer of capital out of the country.

Federal Judge María Servini admitted that she is investigating former president Fernando de la Rúa, former economy minister Domingo Cavallo and other government officials who resigned Dec 20, for their alleged responsibility in the "flight of capital" before and after the restrictions were imposed on savers' deposits Dec 3.

Servini is focussing her attention on the case of 385 armoured trucks that on the eve of the implementation of banking curbs were driven to Ezeiza international airport, located in the outskirts of Buenos Aires.

Also under investigation is the suspected flight abroad of "more than 10 billion dollars" even after the December decree imposing strict limits on withdrawals from bank deposits.

More than 20 billion dollars were transferred abroad prior to the banking curbs, in anticipation of the crisis, and in some cases involved the product of loans received, according to data from the Association of Public and Private Banks of Argentina.

The massive transfer of dollars out of the country has affected the holders of small savings accounts, who no longer have full access to their deposits. The government fears that removing the banking restrictions, a possibility that banks loudly resist, would prompt the collapse of the financial system and that deposits would never be recovered.

President Eduardo Duhalde promised to hand over the data requested by Congress and the justice authorities to ensure that "whoever robbed the money will go to prison". Some lawmakers say that the massive flight of cash was favoured by the Central Bank's lack of control measures.

On another front, the government issued a decree Wednesday that establishes food emergency status until Dec 31, due to the "very grave crisis" the country is experiencing.

Jorge Capitanich, chief of the Cabinet, announced that 350 million dollars in food will be distributed over the course of this year, beginning this month.

But the great number of people who took to the streets in Buenos Aires and in the provinces suggests that the decision came late.

Eleven people tied themselves to telephone and electrical poles Wednesday in the northern province of Jujuy in demand of food. "The crucifixion is symbolic and real, because the cross these people bear every day is hunger and injustice," said Catholic priest Jesús Olmedo in the town of La Quiaca, on the Bolivian border.

The symbolic crucifixion was original and dramatic, but was not the only protest taking place Wednesday. Dozens of marches and rallies were staged in Buenos Aires and in cities throughout the country's interior, to demand food, medicine, jobs and, above all, the return of savers' money that is trapped in the banks.

Hundreds of retailers surrounded two banks in a Buenos Aires neighbourhood shouting "thieves!" and waving signs that read: "Give us our money back" and "Danger: foreign bank at work."

Meanwhile, public employees in Salta province, neighbouring Jujuy, staged a demonstration with a bit of dark irony: they demanded a reduction in the diets of Argentina's lawmakers.

"They think this is a monarchy!" shouted a demonstrator in Salta. "We are governed by a privileged elite that lives in mansions, and here there are people going hungry," he said.

The general feeling of anger was evident among the pensioners and account holders who stood in line outside banks for their turn to withdraw the small sums that are still allowed, only to find Wednesday that there were not enough dollars to go around.

If the banks do not have the U.S. currency, the Economy Ministry indicated it would repeal the measure that allows savers to withdraw 500 dollars in foreign funds each month.

The possibility that foreign currency deposits could be changed to Argentine pesos triggered a rise in the dollar on the open market, nearing two pesos per dollar. Until Jan 6, the peso and the dollar had been pegged at one-to-one parity for over a decade.

The Central Bank was forced to intervene for the second day in the currency trade in order to keep the peso in check. Operations regulated by the official exchange rate are set at 1.4 pesos per dollar.

Cabinet chief Capitanich announced that Argentina's budget for 2002 will near 39 billion dollars, of which 350 million will go towards providing food for the population, and 1.2 billion for paying unemployment subsidies, set at 100 dollars a month.

The International Monetary Fund (IMF) announced Wednesday that it would grant Argentina a one-year extension for a 933-million- dollar debt payment that comes due Thursday.

The decision represents the IMF's "desire to help Argentina overcome its difficult economic and social situation," said the institution's managing director, Horst Koehler.

Argentina's 2002 budget, according to Capitanich, will have a deficit of 2.7 billion dollars. There will be a 15-percent reduction in public spending, which will be achieved by slashing 35 percent of the public sector's bureaucracy.





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