Argentina approves buying cars with deposit bonds,- and you think we have problems.

BUENOS AIRES, Argentina, Aug 13 Reuters reported that Argentina authorized late on Monday purchases of cars and farm equipment with frozen bank deposits that have been swapped into long-term bonds, a move manufacturers hope will spark a jump in sales.

The economy ministry said in a statement it would allow such purchases for 60 days "to free up part of the reprogrammed deposits and benefit depositors."

A chaotic four-year recession led Argentina to freeze most bank deposits in January. Depositors were then allowed to swap their frozen deposits into 10-year government bonds denominated in dollars, regarded by some as a safer choice than waiting for banks to return money in devalued pesos.

Under pressure to ease public anger over the freeze and kick-start the economy, the government has on occasion through different programs allowed frozen funds to be used for purchases of real estate, autos and some other durable goods.

Such plans have been especially effective in the auto sector, one of the hardest hit by a dive in consumer spending. A similar frozen deposits program was the primary driver behind a 47.7 percent increase in Argentine auto production in April compared with March.

Despite that jump, auto production has been kicked lower most of the year, diving 32.1 percent in July compared to July 2001. Half of the country's 650 dealerships sell fewer than three new cars per month, according to a recent report.

Major auto producers in Argentina include Ford , Renault (Paris:RENA.PA - News) and Fiat (Milan:FIA.MI - News). Many automakers have suspended most of their factory staff with pay to bring production into line with depressed demand.

The government said it expected increased consumption would yield a tax windfall of at least 150 million pesos ($41 million), though some economists have feared freeing up bonds for purchases could lead to increased inflation.