The Argentine stock market closed up Monday by 13.4 percent, and the peso, which has been devalued, traded at a slightly stronger rate following the government announcement that all bank accounts in dollars will be converted to pesos. Despite the market reaction, sporadic protests continued Monday against the government restrictions on bank withdrawals.
Small protests were held in various parts of Argentina Monday, including Buenos Aires. Some were staged by unemployed workers, and others by angry depositors, who beat pots and pans and formed human chains around banks to demand an end to the withdrawal restrictions that have been in place since early December. Many of the protesters also want their dollar deposits to be returned to them in dollars, as promised by President Eduardo Duhalde when he took office on January first.
Mr. Duhalde, who became Argentina's fifth president in less than two weeks, appeared to backtrack on his promise this weekend, when he told two major newspapers that all dollar-denominated bank accounts will probably be changed to pesos. On Monday, government spokesman Jorge Capitanich explained there are not enough dollars in Argentina to honor the original promise.
"When Mr. Duhalde made the promise, he had consulted with economists and advisors of the previous government," he spokesman said. "But now it is clear sufficient dollars do not exist in the financial system to make good on the pledge." Mr. Capitanich went on to say that all alternatives will be studied, so that deposits can be returned at current value, or, eventually, in the currency of the depositor's choice.
There are an estimated $46 billion in dollar-denominated accounts, opened during the almost 11-year period when the peso was pegged by law at a one-to-one rate against the U.S. dollar. Mr. Duhalde devalued the peso earlier this month as part of a series of measures to pull the country out of its deep financial crisis, a crisis that brought down two presidents in late December.
Ricardo Delgado, of the Buenos Aires economic consulting firm, Ecolatina, says the government's new position on the dollar deposits surprised few economists.
"Everyone knew there was no way Argentina could generate the dollars needed to fulfill Mr. Duhalde's promise. But now, the situation is much clearer and more honest, and the banks are relieved, because they will not have to come up with dollars to return to the depositors," he said.
This relief may have contributed to the rise of Argentina's stock market Monday, which closed up, with bank stocks showing some of the greatest increases. The peso, which has been floating on the internal market since it was devalued earlier this month, closed slightly stronger Monday as well.
Markets also may have been reacting to news by the government that prices, so far, in January have been rising at a slower rate than expected, despite the devaluation. However, long lines of Argentines formed around the currency exchange houses in Buenos Aires Monday, as people came to buy dollars as a hedge against inflation, or to sell dollars to pay their bills with cheaper pesos.