Uruguay banks stay shut to halt cash loss
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Your support makes all the difference.Uruguay will keep its banks closed until next week in an attempt to staunch the flow of capital from a growing financial crisis.
Banks were closed by government order on Tuesday because of a massive flight of deposits. Cash machines were switched off, triggering panic as people rushed to withdraw savings. The government said yesterday the machines would be working by next week but would distribute only pesos because the banks wanted to retain stocks of US dollars.
Under the strain of the crisis in neighbouring Argentina, the amount of capital in many banks has fallen severely in recent weeks, with deposits dropping 40 per cent this year, leaving many banks struggling to survive.
The government said it had declared the banking holiday after suspending the activities of Banco Montevideo and Caja Obrera for "the non-fulfilment of regulations". Alejandro Atchugarry, the Economy Minister, later said the government had shut the banks because it was not prepared to give them any more help.
The minister also said Uruguay would continue trying to meet its debt obligations and keep a tight grip on fiscal and monetary policy, an approach given strong approval by the International Monetary Fund in recent months.
Meanwhile, Washington said it would support new loans from the IMF to help Uruguay. Government officials are negotiating with the IMF to receive the latest payout from a total of $3bn the agency has lent them for this year and next.
The deep economic crisis in Argentina has made savers jittery and hindered Uru-guay's efforts to raise credit. Uruguay is also in its fourth year of recession.
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