sector.35 At that time, the Uruguayan banking sector was highly “dollarized” with a significant presence of non-resident depositors.36 At December 2001, the total deposits in the banking system equaled 83% of Uruguay’s gross domestic product in 2001; of these, 90% were foreign currency deposits. Of these deposits in foreign currency, 47% were held by non-residents.37 At the end of 2001, deposits of more than one billion United States dollars entered the Uruguayan banking system from Argentina.38 63. In addition, in December 2001, as a result of capital controls imposed by the Argentine Government and deposit freezes on the bank accounts of Argentina’s nationals (known as the “corralito”), Argentines began withdrawing their deposits from Uruguay.39 Subsequently, during the first half of 2002, there was a crisis of confidence in the Uruguayan banking system.40 Beginning in February 2002, a prolonged withdrawal of deposits began owing to the fear that the events that preceded and followed the Argentine default at the end of 2001 would be repeated.41 By July 2002, a cumulative 37.6% of the total deposits had been withdrawn and the Uruguayan Central Bank lost 79% of its international reserves.42 By the end of 2002 the Uruguayan banking system had lost approximately 40% of its total deposits,43 the level of non–resident deposits had decreased by 65%, and the Government controlled approximately 70% of all deposits in the banking system due to bank interventions. 64. As a result of the banking crisis in Uruguay, three financial institutions had liquidity problems and were finally suspended and dissolved: Banco de Montevideo, Banco La Caja Obrera and Banco Comercial, the latter being one of the country’s largest private banks. 44 35 Cf. World Bank. “An Analysis of the 2002 Uruguayan Banking Crisis.” Policy research working paper. No. WPS 3780, December 2005 (file of attachments to the application, volume I, attachment 1, folio 1995). 36 Cf. World Bank. “An Analysis of the 2002 Uruguayan Banking Crisis,” supra note 35 (folio 1996). 37 Cf. World Bank. “An Analysis of the 2002 Uruguayan Banking Crisis,“ supra note 35 (folio 1996). According to witness Julio de Brun, the percentage of depositors in foreign currency “at that time [was] over 80%” and, between December 2001 and July 2002, this fell by 40%. Affidavit of the witness Julio de Brun dated February 16, 2011 (merits file, volume III, folio 1094). In their affidavits, the witnesses Jorge Xavier and Rosolina Trucillo, also agreed when indicating that, at that time, to capital flight occurred in which “more than 40% of the deposits in the system” were lost. Affidavit of the witness Jorge Xavier dated February 16, 2011 (merits file, volume III, folio 1122) and affidavit of the witness Rosolina Trucillo dated February 16, 2011 (merits file, volume III, folios 1135). Also in his affidavit, the witness Fernando Barrán referred to “damages of almost 50% […] of the deposits in the system.” Affidavit of the witness Fernando Barrán dated February 16, 2011 (merits file, volume III, folio 1169). 38 Cf. Inter-American Development Bank. “Uruguay. Banking System Sector Strengthening Program (UR-0150). Loan proposal (file of attachments to the application, volume I, attachment 2, folio 2035). 39 Cf. World Bank. “An Analysis of the 2002 Uruguayan Banking Crisis,” supra note 35, (file of attachments to the application, volume I, attachment 1, folios 1997 to 1999) and of the witness Fernando Barrán dated February 16, 2011 (merits file, volume III, folio 1169). 40 Cf. Affidavit of the witness Fernando Barrán dated February 16, 2011 (merits file, volume III, folio 1169) and affidavit of the witness Jorge Xavier dated February 16, 2011 (merits file, volume III, folios 1122 and 1123). 41 Cf. Affidavit of the witness Julio de Brun dated February 16, 2011 (merits file, volume III, folio 1094). 42 Cf. World Bank. “An Analysis of the 2002 Uruguayan Banking Crisis,” supra note 35 (folio 1998). See also: Affidavit of the witness Rosolina Trucillo dated February 16, 2011 (merits file, volume III, folio 1135). 43 Cf. Affidavit of the witness Jorge Xavier dated February 16, 2011 (merits file, volume III, folio 1122); Affidavit of the witness Rosolina Trucillo dated February 16, 2011 (merits file, volume III, folio 1135); Affidavit of the witness Fernando Barrán dated February 16, 2011 (merits file, volume III, folio 1169), and intervention of Senator Alberto Couriel in the sessions of December 20 and 21, 2002, of the Senate (file of attachments to the answer, volume II, attachment 20, folio 13233). 44 Cf. Affidavit of the witness Julio de Brun dated February 16, 2011 (merits file, volume III, folio 1099) and World Bank. “An Analysis of the 2002 Uruguayan Banking Crisis,” supra note 35 (folios 1997 to 1999). 20