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Friday, 11 January, 2002, 07:07 GMT
Fresh protests rock Argentina
Police tackle rioter during December protests which brought down President Fernando de la Rua
Protests toppled the previous administration
Mass protests have erupted in the Argentine capital Buenos Aires hours before currency markets reopen and the peso's devaluation becomes a reality.

Demonstrators overturned cars, lit fires in the street and threw stones at police, who responded with tear gas and rubber bullets to force about 1,000 people back from the presidential palace.

Tens of thousands of demonstrators converged on the central square, in the first major protest since Eduardo Duhalde became president on 2 January.

Argentine President Eduardo Duhalde
President Duhalde faces his first big protest
The peso is expected to plunge when trading resumes at 1000 (1300 GMT) on Friday following a three-week freeze imposed to prevent volatile trading.

The government has put an end to 10 years of enforced parity with the US dollar in a bid to save the collapsing economy.

The protests began in neighbourhoods across Buenos Aires when people came onto their balconies bashing pots and pans and saucepan lids - anything that would add to the ear-splitting noise.

Then, in what appeared to be a spontaneous move, the demonstrators marched to the Plaza de Mayo, the main square in front of Government House.

Old-age pensioners, families and people in wheelchairs were among their ranks as calls were made for the resignation of the government and supreme court judges.

New peso

Thursday night's protests seem to have been provoked in part by the government's announcement of its short-term plan to protect banks from mass withdrawals by panicking depositors.

New banking measures
Banks must switch current accounts above $10,000 and savings accounts above $3,000 into fixed-term deposits
Dollar deposits will only be returned to savers from Jan 2003
Smaller accounts will be able to convert dollars into pesos at the official exchange rate of 1.4 pesos to $1
Smaller accounts can be accessed, but will be subject to withdrawal limits
Bank loans and mortgages of less than $100,000 will be converted into pesos
Banks must re-negotiate a cut in interest rates on all foreign currency loans

Trading in the devalued peso had been due to restart on Thursday but the central bank said the government had been too slow in implementing the last details of its economic plan.

A dual exchange system is being introduced whereby the peso will have a fixed exchange rate for government and international operations, and a value set by the markets for all other transactions.

Currency operations were suspended and banking restrictions introduced after the former president, Fernando de la Rua, resigned at the height of the protests over austerity measures aimed at ending the economic crisis.

Under the new currency system, the peso - which was previously pegged at one-to-one to the dollar - will be devalued by almost 30%.

The devalued peso will stand at 1.4 to the dollar for international transactions, but Argentines will be forced to purchase dollars at a freely floating exchange rate.

Some analysts believe the system is flawed, and investors had become increasingly nervous while the currency market remained closed.

Export boon

Devaluation is expected to ease pressure on Argentina's exporters by making their products more competitive on the international markets.

Importers, however, will be hurt by the 30% devaluation of the currency - although the controlled exchange rate is designed to prevent the price of imported goods from rising in an inflationary spiral.

The government will allow people to convert dollar loans or mortgages under $100,000 into pesos to protect them from the devaluation.

But for ordinary Argentinians, the near future looks bleak.

"If the government doesn't solve this situation soon, there will be violence," said Irene Fernandez, 43, a social assistant among the protesters in Buenos Aires.

The BBC's David Willis reports from Buenos Aires
"There is now the very real possibility of social as well as economic chaos"
The BBC's Daniel Schweimler in Buenos Aires
"The main aim of this government is to try and get things up and running again"
See also:

09 Jan 02 | Business
Argentina currency fears mount
08 Jan 02 | Business
IMF sees more pain for Argentina
07 Jan 02 | Business
Q&A: Argentina's economic crisis
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