Argentine banks reopen for limited business

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Argentine banks reopen for limited business

Argentina's banks were due to reopen for limited business on Friday, after nearly a week's closure, as Roberto Lavagna, a free-market economist and former diplomat (pictured), was tipped to be the country's sixth economy minister in just over a year.

News agencies said the Harvard-trained Mr Lavagna - currently the ambassador to the European Union - would be joined at the economy ministry by Guillermo Calvo, chief economist at the Inter-American Development Bank.

The new minister faces a daunting challenge as he picks up the portfolio left vacant after Jorge Remes Lenicov resigned on Tuesday.

Friday should, however, bring limited relief from the increasingly acute problems facing ordinary Argentinians, as the banks reopen for five hours from midday, local time, for limited transactions - though no cash will be disbursed. Banks were closed on Monday to avert an immediate collapse of the financial system. Foreign exchange markets remain closed.

The banks' reopening followed the passage through Congress, early on Thursday, of an emergency law tightening a four-month freeze on bank deposits. The swift approval of the stop-gap measure was the first demonstration of a new agreement between the country's principal players that may have put an end to the latest political crisis.

Paul O'Neill, the US Treasury secretary, on Thursday welcomed an agreement between the Argentine government and the often recalcitrant provincial governors and urged the country to keep negotiating with the International Monetary Fund.

"I am pleased to see that the president of Argentina and all the provincial governors have stated their intent to take serious actions," he said. "We encourage the government to move forward in close contact with the IMF."

After Mr Remes Lenicov resigned as economy minister on Tuesday, having failed to secure backing for a law transforming bank deposits into government IOUs, Eduardo Duhalde, the interim president, was forced to return to the loose coalition of provincial governors and legislators that props him up.

According to aides of those present at the meetings, Mr Duhalde sought to change economic policy radically, breaking with the reforms sought by the IMF. However, provincial governors appear to have checked his hand, saying they would ensure the swift approval of several IMF demands.

Following a tense day of talks, the coalition signed a 14-point document that included scrapping the "economic subversion" law that the IMF says is being used to persecute bankers, and formulating a new bankruptcy law.

The governors also agreed to implement a revenue-sharing pact between the provinces and the federal government within 15 days - another key IMF demand.

The only major point left unresolved was whether Argentina would return to a fixed-exchange rate, which would go against the IMF's wishes. Mr Duhalde has indicated that he wishes to impose tight currency controls to stop the peso's depreciation. However, he may again be checked by governors, who fear it could drain dwindling foreign currency reserves.