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Monday, 2 December, 2002, 16:24 GMT
Argentina lifts cash restrictions
Art work showing dollars
Argentineans are now able to make cash withdrawals

Argentines are withdrawing cash from banks for the first time in almost a year after the government lifted several restrictions.

Depositors are permitted to take cash from savings and current accounts without limit, although there are restraints on withdrawals from some other deposits, such as those that require advance notice.

The restrictions, known as the "corralito" or "little fence", were imposed a year ago, amid a deepening financial crisis.

Demonstrations in Buenos Aires, Argentina
Economic hardships led to protests this year
It all came to a head a few weeks later with Argentina defaulting on its debts and devaluing the currency, the peso.

Many bank depositors had a strong suspicion of what was coming and wanted to get their money out to convert it into dollars - a currency that would retain its value.

The danger was that if too many people withdrew their money, the banks would run out of cash and collapse.

The restrictions on withdrawals were intended to prevent that.

Ending the corralito carries risks.

In particular, a rush to buy dollars could further undermine the peso, which has already lost about two thirds of its value.

Inflation risk

Further falls in the currency could exacerbate the sharp increase in inflation that has already happened this year following the financial crisis.

The economy ministry's figures show consumer prices nearly 40% higher than a year ago, while for wholesale prices the increase is 120%.

The removal of the corralito could be an important step back.

A normal functioning economy requires banks working normally.

But those inflation figures underline how much further there is to go.

Moreover, the economy has shrunk by 14% in the last year, and the official unemployment rate is over 20%.

And the official figures do not reveal the full scale of rising poverty and deprivation that has affected Argentina in the last year.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Kate Noble
"Last minute talks appear to have broken down"
The BBC's Alex van Wel
"The principal sum could not be returned"
Damian Melverton, World Bank spokesman
"We have continued to provide money to Argentina under the loans we have approved"
Lael Brainard, Washington's Brookings Institution
"This could put additional pressure on Brazil"

Latest news

Analysis & background

Argentina in turmoil

BBC WORLD SERVICE

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See also:

20 Nov 02 | Business
21 Nov 02 | Business
15 Nov 02 | Media reports
04 Oct 02 | Business
25 Sep 02 | Business
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