Uruguayans cut back spending yesterday to the essentials as month-end bills piled up and the government grappled with how to halt a run on deposits that has already forced the suspension of one bank.
Uruguay's Central Bank extended a temporary halt of bank operations, in place since Tuesday, and said it could continue through Friday in a move designed to stop the bank run, sparking a slide of over 14 per cent in the value of the peso on Tuesday alone.
"A lot of people are not paying their car registration, insurance or taxes. Whatever is less essential is not being paid," said Carlos Berriolo as he walked his daughter to school in downtown Montevideo. "You have to buy food first."
The halt to virtually all bank operations - like those neighbouring Argentina imposed in December to try to stop its bank run - triggered long lines of savers on Tuesday at bank machines to withdraw cash.
Savers across South America this year have rushed to swap their local currencies for dollars and the Uruguayan peso has now shed half its value since June 18th, the day before the government freely floated the peso. The US Treasury Department said it was monitoring Uruguay's problems. - (Reuters)