- The Washington Times - Monday, December 10, 2001

BUENOS AIRES After nearly a decade of stability, the fear is back for Argentines. They are watching their savings warily, worried that the dark past of triple-digit inflation and economic chaos is about to return.
The tension is palpable along the stately boulevards of the capital, known as the Paris of Latin America, with passers-by visiting currency changers to check the latest rates and patrons of the street cafes talking about ways to protect their cash.
"People are bracing for the worst. They don't know what to expect," said waiter Hernan Bellessi, serving coffee and croissants to a half-empty Cafe Tortoni. "The fear is that the lid could come off at any time."
A $132 billion debt crisis and four years of recession have left Argentina teetering on the edge of financial collapse, struggling to maintain some basic services.
A slew of measures have failed to re-ignite the economy, and now international lending has been cut off. Pressure is high on the country's finances, banking system and currency, the peso, which since 1991 has been linked one-to-one with the dollar.
A growing number of economists and analysts are predicting "one of the three D's" default, dollarization or devaluation. Or some combination of the three.
Argentines have credited a decade of stability to the peso-dollar peg, and many hoped this country of 36 million people had left behind the economic chaos that raged here during the late 1980s.
"If you experienced it once, you don't want to again," said Manuel Gomes, a 72-year-old retiree, recalling the time when hyperinflation brought hourly changes in prices and looting in supermarkets.
But now many fear a devaluation will be unavoidable. Argentines withdrew more than $1 billion from savings two weeks ago in a run on the banks that was quelled only after Economy Minister Domingo Cavallo limited cash withdrawals to $250 a week.
So instead of pulling out money, Argentines started dumping pesos for dollars. Last week, thousands of anxious customers flooded banks, trying to change money or shift peso accounts to dollar accounts.
Retirees, told they could withdraw the full amount of their monthly pension, waited in long lines only to be told the money hadn't arrived. They joined thousands of teachers, policemen and state doctors who have gone unpaid as the country's coffers have dried up.
"Where does all the money go that they discount from my account?" asked retiree Rosa Tibiletti, 69. "This is absolutely outrageous. I've got to pay my rent, groceries. They're going to shut off my lights if I don't pay my bill in the next few days."
On the street, the peso's value has already begun to erode. Some foreign exchange houses on Friday were asking up to 1.4 pesos to the dollar.
"I'd rather take a hit on the difference now than be stuck holding worthless pesos later," said Jorge Gatling, one of dozens waiting in a line outside a bank last week hoping to change currency.
Some Argentines sought financial refuge in the stock market, hoping to sell shares for cash in New York or Madrid. Others, desperate to hold something that might retain a value in dollars, used debit cards to buy cars or big-ticket appliances.
Some hoped to acquire dollars any way they could.
Until recently, convenience store owner Hector Tonelli groaned when customers asked if they could pay him in dollars, preferring pesos, which he said were easier to use in day-to-day transactions. No more.
"I'm desperate for dollars," he said. "My mortgage is in dollars, my car payment is in dollars. I fear a devaluation."
A devaluation of the peso likely would mean instant bankruptcy for thousands of Argentines, along with many of the country's largest businesses. More than 80 percent of contracts and debts are denominated in dollars.
Some economists have said Argentine authorities should consider adopting the U.S. dollar as a way to ease the crisis, at least partially. Scrapping the peso for the dollar, they argue, would help to lower interest rates and restore investor confidence.
But with sagging reserves, some question if a dollarization is even possible now. Argentine authorities insist they will continue to defend the peso's link to the dollar.

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