Workers, Retirees Bear Brunt of Argentina's Bank Collapse

by Marcela Valente

The restrictions on bank withdrawals put in place on Dec. 2 to curb a run on the banks, known here as the "corralito" or "little fence," has had a particularly heavy impact on small savers, since many of the major account-holders had already moved their funds abroad or to safe-deposit boxes before the freeze on deposits was declared.

Last year, the flight of Argentine capital to neighboring Uruguay, the United States, Europe or various tax havens was continuous, while demand for safes, strongboxes and safe-deposit boxes climbed steadily.

According to estimates, only $10 billion of the $80 billion deposited in Argentine banks in early 2001 is still there, distributed in around nine million accounts in more than 100 public and private financial institutions.

The remaining $10 billion belongs mainly to small savers like retirees, small business owners and merchants, workers, professionals, and employees who had lost their jobs and were living off the interest from their severance pay.

Some 200,000 account-holders have filed lawsuits demanding the immediate release of their money, arguing that their right to private property has been violated. But so far, only 20 percent have been fully or partially successful.

"We trusted the (state-owned) Banco Nacion for 20 years, because we believed that a public bank could not cheat us, but it did," said Beatriz Arriaga, a 72-year-old pensioner who worked for the transnational corporation General Electric for 31 years and now draws a pension of $85 a month.

As Arriaga spoke to IPS, she held the hand of her 74-year-old husband, Jorge Arriaga, whose pension amounts to $150 a month. "We had sold a house and a car, and we decided not to travel because the buying power of our pensions was shrinking and we preferred to leave a safety net in place," she said.

But today, the couple's dollar-denominated deposits are frozen in the banks, and were forcibly changed to pesos. The local currency has been fast depreciating since the "convertibility law" or currency board that fixed the peso to the dollar for nearly 11 years was scrapped last January.

The latest solution offered by the government of Eduardo Duhalde, who took office on Jan. 1 after two presidents were toppled in less than two weeks by rioting and looting, is a voluntary swap of dollar deposits for Argentine treasury bonds payable in 10 years. Savers have up to July 16 to decide whether they will go in for the swap.

"Unfortunately, we are too old to just sit back and wait until 2012," said Beatriz Arriaga.

On the other hand, the Arriagas are not old enough to qualify for a shorter repayment period, such as dollar bonds payable in three years, which are reserved for people over 75, those suffering serious illnesses, or anyone who can demonstrate that their deposits consist of severance pay.

For deposit-holders willing to accept pesos, the terms are more attractive. Government bonds in pesos will be payable in five years. Otherwise, savers will have to wait for the schedule set up by the banks for the release of deposits, which is to begin in quotas starting in 2003.

Meanwhile, the credibility of banks has fallen to an all-time low, and credit has dried up. The devaluation of the peso against the dollar, which was expected to benefit the national productive sector, has a virtually neutral effect today due to the lack of financing to get local factories and companies back on their feet.

More and more small savers are joining the mass demonstrations held to protest the government's proposal to exchange 30 and 60-day fixed term deposits for bonds payable in five or 10 years.

In a march last week, thousands of outraged deposit-holders demanded that the banks, not the state, be held accountable for their savings.

They also insisted that the courts enforce the right to private property that is enshrined in the constitution, and warned that they would take legal action against foreign banks to hold the central headquarters accountable for the deposits of the clients of their Argentine subsidiaries.

A judge in Spain has already admitted a lawsuit by holders of accounts in the Banco R’o, which is owned by Spain's Santander Central Hispano bank, demanding that the Spanish bank fork over the deposits of the Argentine savers.

Argentina's Economy Ministry was initially confident that its savings-for-bonds swap, in which the state will be held responsible instead of the banks, would be widely accepted by the public. However, the savers who have been most active in trying to recover their money flatly rejected the change in conditions agreed on with the banks.

"I had my money in the Banco Rio, and I want that bank, not the state, to discuss with me in what form it is going to return my money," Vicente Mastropiero, 52, told IPS. "I don't expect the bank to repay it all at once, but I want to discuss it directly with them."

Mastropiero, who took part in the massive Jun. 19 demonstration in Buenos Aires, in which account-holders marched from parliament to the Supreme Court, worked for 31 years in the state-owned telecommunications company that was privatized in the early 1990s.

When he was laid off in October, he decided to wait until the economy pulled out of its four-year recession before he made his dream come true of opening a hardware store, using his severance pay. But in just two months, his dream turned into a nightmare, and now all of his savings, including his severance pay, is trapped in the Banco R’o.

Bank employees, fearful of losing their jobs due to the financial crisis, have also taken to the streets. The deposits-for-bonds swap was designed to ease the pressure, which threatened to drive a number of banks over the brink.

Mabel Gutierrez, 60, works in a textile factory "which is having a terrible time, like all companies." For that reason, she planned to retire soon and top up her small pension with her life savings. But her money is now frozen in the BankBoston.

"I was one of those who believed the advertisements, which said they guaranteed deposits 'with the backing and solidity of a foreign bank'," she told IPS.

"But I'm not going to just leave things the way they are. This time I'm going to fight to the end, even if it's the last thing I do in my life," said an emphatic Gutierrez, who is bitter that she has to take to the streets to demand what is rightfully hers.

Like nearly all of the people taking part in last week's huge protest, Gutierrez has taken legal action to obtain a court injunction for the return of her deposits. But nothing has happened yet, she said. "I am starting to have doubts about my lawyers, because I see that injunctions are only granted for the return of deposits with many zeros" (large sums of money).

Jose Gelbard, 51, carried a small handmade sign reading "No to the Bonds!" He worked 24 years in the Celulosa Argentina company. Since he was laid off three years ago, he has only found temporary work that allows his family to barely scrape by in this once-rich country of 36 million where nearly half of the population has fallen below the poverty line.

Nevertheless, he never doubted that in an emergency, he would be able to count on the severance pay he deposited in the Banco Provincia, which is owned by the government of the province of Buenos Aires.

"You can imagine, I have a wife and two kids, I'm the family breadwinner, and now this...I have begun legal proceedings, but there have been no developments," he told IPS with visible concern.