Holding On, But Barely
So far, Uruguay has fended off a collapse of its banking system, which has been rocked by fallout from Argentina's
financial crisis. Despite a $3.8 billion multilateral aid package,the outlook remains grim.
It took months for the trickle-down effects of Argentina's
financial collapse at the end of last year to seep into
Uruguay, but today the country is deeply immersed in the
contagion that spread across the River Plate. Banks are closed,
the country is in its fourth year of recession, its currency is
devalued and its debt-service payments have ballooned.
Stern talk: US
Treasury Secretary Paul O'Neill and
Uruguayan President Jorge Batlle.
When the Uruguayan government imposed a partial freeze on
bank withdrawals in July to prevent a widespread banking
crisis, angry protesters ran through the streets of Uruguay's
usually sleepy capital flinging stones at store windows and
destroying supermarkets. Dozens of people were injured.
Only the promise of $3.8 billion in loans from the US
government, the International Monetary Fund and other
multilateral agencies restored calm. Bank withdrawals have
eased a little and confidence has begun to recover.
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