Argentina’s supreme court has upheld a 2002 government decision to convert US dollar bank accounts into devalued pesos, a process known as pesofication, the court said in a statement.
At the height of the country’s 2001-02 economic and financial meltdown, President Fernando de la Rúa opted for a freeze on deposits (known as corralito) and capital controls in a bid to save the banking sector from going under in the face of massive withdrawals.
The decree – which followed Argentina’s default on its sovereign debt – prompted angry depositors to file 50,000 lawsuits against local banks, seeking the original dollar value of their savings.
This week’s ruling orders banks to compensate depositors at 3.08 pesos (US$1.00) per US dollar, equal to the pesofied deposits they would hold today under the original decree. The court applied a currency conversion rate of 1.40 pesos per dollar, adjusted by Argentina’s CER inflation coefficient, and adds a 4% annual interest rate to be applied retroactively since the pesofication began.
"Argentina’s institutionality is at the levels of African countries and the ruling validates the trick played on depositors in 2002," local economist Jose Luis Espert told BNamericas.
Espert said that while the ruling has shut the door on the pesofication issue for good, it is still too early to say if depositors will keep suing banks for interest lost during the past five years.
"Furthermore, the 4% annual interest rate banks will have to pay in compensation doubles the 2% set by a central bank ruling in 2002, which will certainly increase bank costs," he said.
"The justices debated at length over this question. The ruling aims at social peace and shows a consensus is possible over difficult matters affecting the community," the court statement read.
The ruling "only applies to depositors who filed legal actions and therefore has no effect on those who accepted other alternatives," the court said.
