Argentina's lower house has given preliminary approval to an emergency economic plan that allows for the devaluation of the peso. Deputies debated for nine hours before approving the general outlines of the bill. The Lower House is continuing a line-by-line debate on the bill through the night, but is expected to send the bill to the Senate later Sunday, where it is likely to pass.
The emergency bill gives President Eduardo Duhalde special powers to boost Argentina's struggling economy, including the power to overturn the 1991 law that established the Argentine peso's one-to-one peg with the U.S. dollar.
The bill declares Argentina to be in a state of public emergency regarding economic policies, and allows the executive branch to take on extraordinary powers to deal with the severe social and economic crisis. The bill not only gives Mr. Duhalde the power to devalue to currency, but also allows him to convert dollar debts under $100,000 into pesos, thus protecting average citizens.
The plan also moves all utility bills to pesos, despite standing agreements with foreign companies that set contracts in U.S. dollars.
While Congress did not say how severe the devaluation would be, government officials have indicated that the peso would be fixed at around 1.40 to the U.S. dollar.
Argentina's 1991 Convertibility Law, which established the peso-to-dollar peg, was implemented to curb four-digit inflation. Many Argentines fear the devaluation will mean a return to the days of hyper-inflation.
Anticipating higher import costs, many stores selling imported goods, such as appliances and electronics, have already begun marking up prices by 20-to-40 percent, despite the president's appeal for retailers not to raise prices.
Mr. Duhalde is Argentina's 5th president since December 20, when former President Fernando De La Rua was forced from office after two days of widespread social unrest sparked by the economic crisis.
Early Sunday morning, the streets of Buenos Aires were quiet, although there was a notable police presence around government buildings.