Emergency meetings in Washington between an economic team from Argentina and the International Monetary Fund dragged on through the weekend as the South American country sought to stave off national bankruptcy.
Unless the IMF can be persuaded to reconsider a stalled $1.3bn (£950m) loan, the economic shockwaves may be felt across the developing world. Guillermo Prieto, who heads the Mexico City stock market, predicted that an Argentine default on its $132bn debt could cause economic meltdown in South America, where the bad old days of hyper-inflation and state-dominated markets could return unless a viable plan emerges.
Argentina's economy minister, Domingo Cavallo, appeared confident after the first round of talks, saying: "Life is going to continue normally in Argentina." In Buenos Aires, however, people were less sure. South America's second biggest economy is on the brink of a precipice as it enters its fourth year of recession, and nobody can tell how low the peso, pegged to the dollar for the past decade, will eventually go.
Both Mr Cavallo and President Fernando de la Rua insist that devaluation is unthinkable, and the economy minister said the subject did not come up in the first round of talks with the IMF. Rather than abandon the link to the US currency, Argentina is more likely to abolish its own currency altogether and simply use the dollar instead.
The dollar peg was introduced in a desperate effort to bring some economic discipline to Argentina, and did help to control runaway inflation. But the peso eventually grew overvalued, sending Argentines flooding across the borders to buy cheaper goods in neighbouring Chile and Brazil. Recession inevitably followed, and unemployment rose to 16 per cent, but the government did nothing to curb its own overspending. Now it is making things worse as it tries to bridge the financial gap, and the IMF is refusing to lend more money on the grounds that the deteriorating economic situation is making Argentina miss its targets for reducing the budget deficit.
Last week, four days after new decrees had halted a billion-dollar run on the banks, the government seized $3.5bn in private pension funds and converted them to bonds. One analyst said Mr Cavallo had "done a Robert Maxwell on the whole country", and lawsuits may follow.
Rumours that bank accounts were about to be frozen or the peso devalued created huge queues outside banks last week as account holders sought to withdraw all their money or convert their savings into dollars. Despite new withdrawal limits of $250 a week, currency supplies ran out on Friday, leading to angry demonstrations in which the stock exchange was pelted with stones and rotten eggs. Fire hoses were used to disperse rampaging students and trade unionists.
On Monday, one desperate debtor in the provinces called a press conference to plead for financial help, then shot himself in front of television cameras. Teachers and civil servants have gone on strike to demand their pay, only to be given government bonds rather than money. Even the former middle classes have resorted to bartering goods to survive, rather than using cash. "Things are awful," said Osvaldo Marrodan, a former shop owner who now drives a taxi.
In Buenos Aires, where there is a psychiatrist for every 164 people, consumption of anti-depressants grew by 13 per cent and tranquillisers by 4 per cent, a survey revealed last week – at a time when sales of general medicines dropped by 10 per cent. Even lottery ticket sales are down, to the bemusement of Tino, owner of a national lottery stand. "They say the greater the crisis, the more people play the lottery," he said, "but I've found the opposite is true. Sales have fallen 30 per cent since these measures have been implemented."Reuse content