ARGENTINA: COURT RULES AGAINST GOVERNMENT PESO RULES.
| Cargo | US dollar bank accounts converted to pesos |
Argentina's Corte Suprema de Justicia (CSJ) on March 5 overturned a government decree that forcibly converted dollar- denominated bank accounts to the Argentine peso. Although the ruling only affected deposits belonging to the province of San Luis, it drew hundreds of cheering people to the steps of the courthouse. 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 deposits in the original currency.
By a 5-3 vote, the high court said the forced conversion of the San Luis account to pesos was a violation of property rights. The ruling did not specify how the bank would go about converting the account back into dollars.
The decision is sure to strengthen the claims of other depositors, many of whom are seeking the redollarization of their accounts in lawsuits that are wending their way through courts. Together, those claims amount to an estimated US$10 billion, almost exactly matching Argentina's foreign currency reserves at the moment. Both the government and the banks holding the peso deposits have warned that they do not have enough assets on hand to comply with a redollarization decree if its terms are extended to other depositors.
San Luis governor pursues principle
The savings of San Luis province were frozen in a branch of the state-run Banco Nacion as part of a banking freeze imposed in December 2001 by former President Fernando de la Rua (1999-2001) in an effort to halt a run on the nation's banks (see NotiSur, 2001-12-14).
Then in January 2002, President Eduardo Duhalde ended the peso's one-to-one peg with the US dollar and ordered all dollar deposits converted to pesos at a rate of 1.4 to the dollar (see NotiSur, 2002-01-11, 2002-02-15). At one point, the peso had fallen to 3.8, but it has recovered somewhat, and is now at about 3.1 pesos to the dollar.
Duhalde's decree, called the corralon (big corral or fence), prevented deposits made in dollars from being withdrawn in that currency or its equivalent after the devaluation of the peso. The government said the money would be returned beginning in 2005, in installments.
The lawsuit on which the CSJ made it ruling was initiated by San Luis Gov. Alicia Lemme, who refused to accept the conversion to pesos of the province's money. She pushed the case until it reached the highest court.
After months of debate, the CSJ ruled in favor of San Luis, saying Banco Nacion had to return to San Luis the...
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