- Title: URUGUAY: POLICE GUARD BANKS AFTER FREEZE ON DEPOSITS.
- Date: 3rd August 2002
- Summary: (W1) MONTEVIDEO, URUGUAY (AUGUST 2, 2002) (REUTERS - ACCESS ALL) 1. VARIOUS: SECURITY OUTSIDE BUSINESSES; CLOSED BUSINESSES (12 SHOTS) 0.54 2. GV/PAN/MV/CU: LONG LINES OUTSIDE AUTOMATIC TELLER MACHINES (4 SHOTS) 1.12 3. GV/GV/PAN/TRACK/CU: SECURITY; CLOSED BUSINESSES (5 SHOTS) 1.36 4. GV: EXTERIOR OF UNITED STATES EMBASSY/ CU SIGN (
- Embargoed: 18th August 2002 13:00
- Keywords:
- Location: MONTEVIDEO, URUGUAY
- Country: Uruguay
- Reuters ID: LVA9JWDZYTCR8IX2WEGERKOW9XP1
- Story Text: One thousand police filled the streets of Uruguay's
capital on Friday to prevent further looting after a run on
banks prompted a partial deposits freeze in a nation
considered until this year the Switzerland of South America
for its rock-solid bank sector.
The U.S. Treasury plans to lend Uruguay $1.5 billion in
aid through the International Monetary Fund after a third of
savings were pulled from banks and foreign reserves fell
almost 80 percent so far this year, two Uruguayan senators
said after they were briefed by President Jorge Batlle.
The IMF said from Washington it had no announcement on aid
for Uruguay but both it and the U.S. Treasury Department said
news over the weekend was possible.
The U.S. ambassador to Uruguay said the U.S. government
would support financial aid through multilateral organizations
but the amount or timing had not yet been decided.
"The United States government is pleased to support the
IMF. the Inter-American Development Bank, the World Bank and
their efforts to help Uruguay complete a deal," said U.S.
Ambassador, Martin Silverstein.
Uruguay, financially and socially stable for years until a
recent run on banks, plans to limit some dollar withdrawals
from term deposits only, Vice President Luis Hierro said,
adding a bill would be sent to Congress soon.
But such a proposal, on a narrower range of accounts but
imposing a similar time release schedule as in neighboring
Argentina, is one of Uruguayans' worst fears after this week's
halt to most banking operations, which was imposed to stop a
run that has drained a third of savings deposits this year.
The other fear is an outbreak of civil unrest, after a
decade of tranquillity was shattered by Thursday's (August 1)
looting.
Two helicopters darted across the sky over this city of
1.5 million as many shop owners erected fences, kept their
metal shutters down and reinforced them with piles of logs
after 49 people were arrested on Thursday when 25 shops and
restaurants were looted by rock-hurling mobs.
On Tuesday (July 30), the government declared a bank
holiday, now extended through Friday (August 2), as
withdrawals of pesos and dollars by nervous depositors
accelerated. The government also closed automated teller
machines (ATMs) for a day and then limited withdrawals to
pesos and not dollars.
Riot police raced from supermarkets to shops around
Montevideo in response to false alarms of further looting.
Uruguay has been shaken by the savings exodus, a dive in
consumer spending and the ripple effects of Argentina's
economic meltdown. Fears Brazil could end up defaulting on its
$250 billion public debt have also compounded problems.
Lawmakers said limits on access to dollars could be
imposed over three years on some of Uruguay's top
domestically-owned banks: public banks Banco Hipotecario,
Banco de la Republica Oriental del Uruguay and Banco Credito
as well as private banks Banco Galicia Uruguay and Banco
Montevideo Caja Obrera -- all now under state control due to
liquidity problems.
Uruguay was one of a handful of Latin American nations
that enjoyed investment-grade status until earlier this year
and has seen a three-year recession plunge one in four
citizens into poverty while the unemployment rate has soared
to a 30-year high, with 15.6 percent of the work force out of
a job.
Uruguayans are now pinning their hopes on U.S. Treasury
Secretary Paul O'Neill who is due here next Tuesday and has
lobbied for aid for the Ohio-sized nation sandwiched between
Argentina and Brazil.
The peso RPNJ> has fallen to 27 to the dollar, a fall of
about 50 percent since June's devaluation while consumer
prices jumped almost 5 percent in the same period.
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