Cavallo, Domingo

▪ 2002

      When Domingo Cavallo was appointed economy minister on March 20, 2001, Argentines hailed him as a reformer who could rescue the economy from its dire straits. It was the second time in a decade that he had been appointed to the position, and he was the third person to hold it within a month. The Argentine economy, the second largest in South America, had been in recession for nearly three years, with an unemployment rate of 15% and large budget deficits. The government had been unable to meet targets set by the International Monetary Fund (IMF), and there was widespread fear that it would default on loans. Thus, the task before Cavallo, both to invigorate the economy and to restore confidence, was enormous.

      Cavallo was born on July 21, 1946, in San Francisco, Córdoba province. He was trained as a certified public accountant (1966) and earned master's (1968) and doctoral (1969) degrees in economics from the National University of Córdoba. In 1977 he earned a Ph.D. in economics from Harvard University. He taught at the National University of Córdoba (1969–84), Catholic University of Córdoba (1970–74), and New York University (1996–97). He was the author of a number of books and articles and the publisher of Forbes Global in 1998–99. In addition, he received many awards and prizes, as well as a number of honorary degrees.

      Cavallo was the head of Argentina's central bank in 1982, minister of foreign affairs from 1989 to 1991, and economy minister from 1991 to 1996. In the early 1990s the Argentine economy was suffering from runaway inflation, which Cavallo controlled by pegging the value of the peso to the U.S. dollar. He also instituted an extensive privatization plan. The economy revived, but in 1996 Cavallo left the government of Pres. Carlos Menem, which was charged with widespread corruption. The following year Cavallo founded the Action for the Republic (AR), a centre-right party, and won his first term to the Chamber of Deputies. He was unsuccessful in a bid for the presidency in 1999 and was defeated in a run for mayor of Buenos Aires in 2000.

      Upon his appointment as economy minister by Pres. Fernando de la Rúa in 2001, Cavallo acted quickly. His program called for increased tax revenues coupled with spending cuts, and he took steps to stimulate investment. These measures, however, failed to pull the Argentine economy out of its slump, and public confidence in the government tanked. After a $2 billion bank run on November 30, Cavallo limited cash withdrawals to $250 per week—a move that in part triggered the massive street protests that erupted in Buenos Aires in December. Argentina could not avoid defaulting on its $132 billion foreign debt, and both Cavallo and de la Rúa resigned office on December 20.

Robert Rauch

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