Holding On, But Barely

Oct 1, 2002

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.

Stern talk: US Treasury Secretary Paul O'Neill and
Uruguayan President Jorge Batlle.

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.

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. Still,...

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