BUENOS AIRES, Argentina (Reuters) - Argentina's new President Eduardo Duhalde, blaming free market policies of the last decade for creating social chaos, asked Congress on Friday to rescue the economy by allowing a traumatic currency devaluation.
Duhalde proposed a bill to Congress that seeks special powers enabling him to dismantle the peg that kept the peso one-to-one against the U.S. dollar. That peg was blamed for worsening a four-year economic slump that sparked deadly riots and political chaos.
Congress, controlled by Duhalde's Peronist party, will almost certainly pass the bill, which also gives the president powers to reform the foreign exchange and banking systems, regulate prices of goods and services, safeguard the value of savers' bank deposits and ensure debtors do not go bankrupt.
While Congress prepared to act this weekend, Argentines huddled in pouring rain outside banks wondering if they would ever recover their deposits. Drug stores ran out of medicines like insulin, and shops raised prices to hedge against a devaluation that will be an effective income cut for millions.
Duhalde became the fifth president in over two weeks after food riots left 27 dead and shook one of Latin America's wealthiest countries. He is placing the burden of devaluation on banks, foreign investors and big firms like oil companies.
Harkening back to statism that is largely a thing of the past in Latin America, he plans to fix price limits for basic goods and services including bread and telephone service to stem devaluation-induced hyperinflation of the sort that ravaged Argentina in the 1980s.
Eager to avoid the social protests that caused President Fernando de la Rua to resign last month, which heralded political chaos as three other presidents quickly came and went, Duhalde has also promised measures to safeguard debtors and savers.
Economists are skeptical the measures will succeed because Argentines have lost all confidence in banks and the new system is seen as open to corruption and growth of a black market.
Some Argentines voted with their feet, lining up by the Italian consulate to ask for visas to leave the country.
But perhaps in a sign that economic nationalism touched a cord among Argentines, there were no major street protests against the measures. Banging of pots and pans by the country's middle class and their spontaneous marches had already led to the resignations of two presidents in December