MercoPress. South Atlantic News Agency

Argentine banks must return 2001/02 frozen deposits

Five years later and in a long-awaited ruling, the Argentine Supreme Court ordered local banks to reimburse in full their customers savings that were frozen during the economic crisis of 2001/02, when Argentina also defaulted on its foreign debt.

The dollar deposits have to be converted to Argentine pesos at an exchange rate of 1.40 pesos plus an adjustment coefficient with interest of 4% per annum which have accrued since the freeze was implemented. The Argentine government in 2001/02 had frozen US dollar accounts held by some 50,000 depositors then forcibly converted them to devalued pesos. The high court upheld the government's right to issue that decree but it gives savers approximately the same amount in pesos their savings had been worth in dollars when the crisis ensued. The ruling was signed by Justices Carlos Fayt, Elena Highton de Nolasco, Carmen Argibay, Eugenio Zaffaroni and Ricardo Lorenzetti, while Juan Carlos Maqueda abstained in dissent and Enrique Petracchi was excused because he has a term deposit. The magistrates took all day to reach their ruling and reports appear to indicate that there was still many aspects that they failed to agree on. However, in their ruling the justices stated that "the aim of the ruling is to achieve social peace and show that it is possible to achieve a consensus on such difficult issues that affect the community". The reimbursement formula applied by the Court implies that "savers should recover 100% of the value of their dollar deposits," the Court stated. In the midst of the crisis bank accounts were frozen and any deposits held in US dollars forcibly converted into devalued pesos. Until the financial crisis, Argentina had pegged its currency at a rate of one to one to the US dollar. But as a consequence of the economic meltdown the Argentine peso went into freefall and eventually settled at about three pesos to the dollar which meant that deposit holders lost two-thirds of their money. The high Court ruling means the dollar account holders will get their money back in pesos at an equivalent rate to the peso's current exchange rate with the dollar. The Justices also point out in their ruling that their decision is not just about returning lost savings deposits, but also about protecting property rights and helping the country find social peace.