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Back in Business, 
Argentina Calms Down
 and the Peso Perks Up

By: Larry Rohter
 The New York Times, April 30, 2002

Buenos Aires, April 29-  For the first time in more than a week, Argentina resembled a normal country today. Banks were open, the stock market was trading and pesos were once again being exchanged legally for dollars, drawing people to flock to streets and stores.

The day passed without turmoil, a small triumph for the country's new economy minister, Roberto Lavagna, who was sworn in on Saturday.

In his first major policy move, Mr. Lavagna persuaded President Eduardo Duhalde to allow the peso to continue to float against the dollar and abandon, at least for the moment, a plan for a fixed exchange rate that analysts here warned could not be maintained.

"This is the first stage of supplying oxygen" to an economy that has been all but paralyzed for more than four months, Mr. Lavagna said in an interview published today in the daily La Nación. He promised that a new economic program the government is expected to announce this week will be clear and simple.

"If there is anything that has been excessive, it is the number of measures and countermeasures" announced to combat the crisis, he said.

After an uncertain start, the peso actually strengthened against the dollar, closing at 3.10. It closed at 3.21 on April 19, the day that the government decreed a moratorium on bank and foreign exchange transactions.

Analysts attributed the peso's rise to Argentine exporters who were trying to unload dollars they could not trade during the suspension of operations last week.

But the results were obtained only with the help of a highly controlled trading environment. In an effort to prevent depositors from rushing to trade their pesos for dollars, exchange houses were allowed to open for only four hours, and a $500 limit was placed on transactions.

"Our leaders don't know how to do anything in an honest and straightforward fashion," Andrés López, an office worker, complained as he waited to change dollars so that he could pay his end-of-the-month bills. "There is always some trick, some catch, to keep us from doing with our money what we wish, rather than what they want us to do."

Some analysts were cautiously optimistic. The scarcity of pesos, combined with a law passed last week that makes it harder for Argentines to withdraw money from their bank accounts, "could be sufficient to calm the exchange market" over the next few days, said Rafael Ber of Argentine Research, a leading economic consulting firm here.

Mr. Lavagna said, however, that his main order of business was to find a way to lift the restrictions. "We are thinking of a plan to exchange deposits for bonds," he acknowledged in an interview over the weekend with the daily Clarín. But he added that any new proposal the government submitted to Congress would require "that the banks participate in part of the repayment of deposits." In a scheme that Congress rejected last week, the government would have borne the entire burden of the bond debt.

In Washington, President Bush's national security adviser, Condoleezza Rice, once again linked any resumption of aid to Argentina to carrying out reforms demanded by the International Monetary Fund.

"Argentina has to do some difficult things," Dr. Rice said in remarks to students at Johns Hopkins University in Washington. "We truly believe that if they can just do the things that the I.M.F. is requesting that they do," she added, then and only then can Argentina "find a way back to sustainable growth."

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