Cavallo Hopes To Rescue Economy
Mar. 22, 2001
BUENOS AIRES, Argentina (AP) _ On Wall Street, some likened the appointment of Argentina's new economy minister to ``The Return of the Jedi.'' At the Government House, business leaders clapped ecstatically when Domingo Cavallo was sworn in to the top finance job _ once again.
Now many hope Cavallo, Argentina's economic miracle worker of the early 90s, can pull off yet another surprise.
On Wednesday he embarked on his first full day on the job as Argentina's economy minister, bent on reviving a country saddled with more than $120 billion in debt, 15 percent unemployment and a recession nearly three years in the making.
Argentina had already burned through two economy ministers around the wild ides of March until embattled President Fernando De la Rua settled on Cavallo, perceived by many as his last resort to get the economy going again.
Now 54, Cavallo is more portly than he was a decade ago when he first wowed Wall Street by getting a near moribund economy back on its feet.
In 1991, the Harvard-trained economist took over as economy minister under Carlos Menem at a time when the country teetered on the brink of economic chaos: Cavallo laid four-digit inflation to rest and shored up the currency by pegging the Argentine peso at one-to-one with the dollar. He then launched one of the most vigorous privatization plans in the world as Argentina enjoyed annual growth rates as high as 9 percent a year.
A white knight once before, he faces a daunting task. And there's no guaranteed Hollywood ending.
``Cavallo is not a magician. This country has serious challenges,'' said Benny Thomas, a vice president at T. Rowe Price International based in Baltimore, Md. ``He's Argentina's last chance.''
At stake is South America's second-largest economy, whose ill health _ if it continues unchecked _ could bode badly for other emerging markets around the world. On Wednesday, Brazilian stocks in Sao Paulo finished slightly lower as caution about neighboring Argentina ate into early gains.
``As an international investor in Latin America, our concern is not only with Argentina but also with the issue of contagion,'' added Thomas.
The economic problems Cavallo will encounter are different now.
Weighed down by ballooning debt, Argentina now must begin meeting fiscal deficit targets set by the International Monetary Fund to retain a $40 billion aid package awarded last December by international lenders.
Cavallo has asked Congress to grant De la Rua special powers to reorganize government agencies, sell government assets and revamp tax laws by executive decree. He also has said cutting tax evasion will be a priority.
At news conference Wednesday night, Cavallo vowed to reduce bureaucracy, waste, theft and corruption in government administration so local companies will benefit and the economy can rebound.
Argentina's third economy minister in a month, Cavallo will have to heed the mistakes of his predecessor, Ricardo Lopez Murphy. In office all of two weeks, Lopez Murphy resigned Monday after his proposal to enact spending cuts of $4.45 billion over two years shriveled for lack of political support.
But if anyone can kick start Argentina's economy back to health, Cavallo can _ or so many Argentines hope.
``I have faith in Cavallo,'' said Orlando Benitez, a 60-year-old retired bus driver. ``He'll find a way out of the mess.''
Acting on his economic successes, Cavallo carved out his own minor center-right political party, Action for the Republic, winning election to the lower house of Congress. At airports, people spot his shiny bald pate and shout out his nickname: ``Mingo, go get em!''
He ran unsuccessfully for president in 1999 and again a few months later for Buenos Aires mayor. But any repeat success as economy minister could propel his party to gains in midterm elections in October _ or even help Cavallo launch a stronger run for president in 2003.
Stories in the Argentine press extol Cavallo's ingenuity. The accounts have it that he built the best go-carts in his neighborhood as a child, beating the others at the races.
He also excelled in mathematics, leading him to get a doctorate in economics at Harvard. Then came a high-profile career, including stints as foreign minister and central bank president.
``Cavallo is very well-known worldwide,'' said Mercedes Mallo, 52, a Buenos Aires bar owner. ``I have hope that he is the one who can get us out of this crisis.''