In July 1982,after the Falklands War fiasco brought more moderate leadership to the military dictatorship,Cavallo was appointed president of the Central Bank. He inherited the country's most acute financial and economic crisis since 1930,and a particularly heinous Central Bank regulation painfully remembered as the Central Bank Circular 1050.
Implemented in 1980 at the behest of conservativeMinister of Economy,JoséAlfredo Martínez de Hoz,policy tied adjustable loan installments (nearly all lending in Argentina is on an adjustable interest basis) to the value of the US dollar locally. Exchange rates were controlled at the time and therefore raised little concern. The next February,however,the peso was sharply devalued and continued to plummet for the rest of 1981 and into 1982. Mortgage and business borrowers saw their monthly installments increase over tenfold in just a year and many,including homeowners just months away from paying off their loans,unable to keep up,either lost their entire equity or everything outright.[6]
Cavallo immediately rescinded the hated Circular 1050 and as a result,saved millions of homeowners and small-business owners from financial ruin (as well as millions more,indirectly). What followed,however,remained the subject of great controversy.[7]
Though nothing new to the economic history of Argentina,he is often accused of implementing financial policies that may have allowed Argentina's main private enterprises to transfer their debts to the state,transforming their private debt into public obligations. During 1982 and 1983,more than 200 firms (30 economic groups and 106 transnational enterprises) transferred a great part of their 17 billion dollar debt to the federal government,thanks to secured exchange rates on loan installments. This fraud took place both before and after his very brief turn at the Central Bank,but not while he was in charge. In a speech in September 1982 he was forced renounce and express his opposition to the transfer of debt to the state. He inherited this practice from Martínez de Hoz himself (whose chief interest,steelmaker Acindar,had unloaded US$700 million of its debts in this way). Moreover,Cavallo subjected payments covered by these exchange rate guarantees to indexation;this latter stipulation was dropped by his successor,Julio González del Solar.[8][9]
His involvement in politics began when he was elected as a student representative to the highest government body of the Economics School (1965–1966). He acted as Undersecretary of Development of the provincial government (1969–1970),director (1971–1972) and vice chairman of the board (1972–1973) of the Provincial Bank and Undersecretary of Interior of the national government.
This controversy notwithstanding,upon Argentina's return to democracy in December 1983,he became a close economic advisor to Peronist politician JoséManuel de la Sota and was elected as a Peronist deputy for Córdoba Province in the 1987 mid-term polls.
Drawing from his Fundación Mediterránea think-tank,he prepared an academic team for taking over the management of the economy,and to that end he participated actively in Carlos Menem's bid for the presidency in 1989. President Alfonsín's efforts to control hyperinflation (which reached 200% a month in July 1989) failed,and led to food riots and Alfonsín's resignation.
As Menem initially chose to deliver the Economy Ministry to senior executives of the firm Bunge y Born,Cavallo had to wait a few more years to put his economic theories into practice. He served as Menem's foreign minister,and was instrumental in the realignment of Argentina with the Washington Consensus advanced by U.S. PresidentGeorge H. W. Bush. Finally,after several false starts,and two further peaks of hyperinflation,Menem put Cavallo at the helm of the Argentine Economy Ministry in February,1991.
Minister of Economy at the Menem administration
Productivity per hour worked between 1991 and 1996 increased by 117%. More than any other country on any 5-year period since the start of the series in 1950.
He was the ideologist behind the Convertibility Plan,which created a currency board that fixed the dollar-peso exchange rate at 1 peso per US dollar;he signed his plan into law on April 1,1991. Cavallo thus succeeded in defeating inflation,which had averaged over 220% (1975–1988),had leapt to 5000% (1989) and remained at 1300% (1990).[16]
President Menem had already privatized the state telecom concern and national airlines (the once-premier airline in Latin America,Aerolíneas Argentinas,which was later almost run into the ground). The stability Cavallo's plan helped bring about,however,opened prospects for more privatizations than ever. Going on to total over 200 state enterprises,these included:the costly state railroads concern,the state oil monopoly Yacimientos Petrolíferos Fiscales,several public utilities,two government television stations,10,000km (6000mi) of roads,steel and petrochemical firms,grain elevators,hotels,subways and even racetracks. A panoply of provincial and municipal banks were sold to financial giants abroad (sometimes over the opposition of their respective governors and mayors) and,taking a page from the Chile pension system privatization,the mandatory National Pension System was opened to choice through the authorization of private pension schemes.[17]
GDP,long stuck at its 1973 level even with a growing population,grew by about a third from early 1991 to late 1994. Fixed investment,depressed since the 1981–82 crisis,more than doubled during this period.
Consumers also benefited:income poverty fell by about half (to under 20%) and new auto sales (likewise depressed since 1982) jumped fivefold,to about 500,000 units. This boom,however,had its problems early on. Tight federal budgets kept the budget deficits of the provinces from improving and,though many benefited from Cavallo's insistence that large employers translate higher productivity into higher pay,this same productivity boom (as well as the nearly 200,000 layoffs the privatizations caused) helped unemployment jump from about 7% in 1991–92 to over 12%,by 1994.
The 1995 Mexican Crisis shocked consumer and business confidence and ratcheted joblessness to 18% (the highest since the 1930s). Confidence and the economy recovered relatively quickly;but,the consequences of double-digit unemployment soon created a crime wave that to some extent continues to this day. Unemployment and poverty eased only very slowly after the return to growth in early 1996.
In mid-1995,Cavallo denounced the existence of presumed "mafias" entrenched within the circles of power. After his first public accusations,relations between Cavallo,President Menem and his colleagues became progressively strained.
In 1996,shortly after Menem's reelection,the flux of money from privatisation ceased,and Cavallo was ousted from the cabinet,due to his volatile personality and fights with other cabinet members,coupled with staggering unemployment and social unrest caused by his economic policies and the Mexican crisis. Following months of speculation,Menem asked for his resignation on July 26,1996.[18]
Cavallo ran for president in 1999,but was defeated by Fernando de la Rúa. Cavallo came in third place and received 11% of the vote,far behind both de la Rúa and the other main candidate,PeronistEduardo Duhalde.
Cavallo was called by President de la Rúa in March 2001 to lead the economy once again,in the face of a weakened coalition government and two years of recession.[19]
He attempted to restore business confidence by renegotiating the external debt with the International Monetary Fund and with bondholders,but the growing country risk and spiraling put options by large investors and foreign holdings led to a bank run and a massive capital flight. In late November 2001,Cavallo introduced a set of measures that blocked the usage of cash,informally known as the corralito ("financial corral"). The anger of those Argentines with the means to invest abroad created a framework for the popular middle-class protest termed the cacerolazo.
Political pressure by the Peronist opposition and other organized economic interests coincided with the December 2001 riots. This critical situation finally forced Cavallo,and then de la Rúa,to resign.[20]
A series of Peronist presidents came and left in the next few days,until Eduardo Duhalde,the opponent of De la Rua and Cavallo in the 1999 presidential election,took power on January 2,2002. Soon afterwards the government decreed the end of peso-dollar convertibility,devalued the peso and soon afterwards let it float,which led to a swift depreciation (the exchange rate briefly reached 4 pesos per dollar in July 2002) and inflation (about 40% in 2002).
Between April and June 2002,Cavallo was jailed for alleged participation in illegal weapons sales during the Menem administration. He was exonerated of all charges related to this scandal in 2005.[21]
Cavallo served as the Robert Kennedy Visiting Professor in Latin American Studies in the department of economics at Harvard University from 2003 to 2004.
Carlos Saúl Menem was an Argentine lawyer and politician who served as the president of Argentina from 1989 to 1999. Ideologically,he identified as a Peronist and supported economically liberal policies. He led Argentina as president during the 1990s and implemented a free market liberalization. He served as President of the Justicialist Party for thirteen years,and his political approach became known as Menemism.
The economic history of Argentina is one of the most studied,owing to the "Argentine paradox". As a country,it had achieved advanced development in the early 20th century but experienced a reversal relative to other developed economies,which inspired an enormous wealth of literature and diverse analysis on the causes of this relative decline. Since independence from Spain in 1816,the country has defaulted on its debt nine times. Inflation has often risen to the double digits,even as high as 5,000%,resulting in several large currency devaluations.
The politics of Argentina take place in the framework of what the Constitution defines as a federal presidential representative democratic republic,where the President of Argentina is both Head of State and Head of Government. Legislative power is vested in the two chambers of the Argentine National Congress. The Judiciary is independent,as are the Executive and the Legislature. Elections take place regularly on a multi-party system.
Eduardo Alberto Duhalde is an Argentine former peronist politician who served as the interim President of Argentina from January 2002 to May 2003. He also served as Vice President and Governor of Buenos Aires in the 1990s.
Fernando de la Rúa was an Argentine politician and a member of the Radical Civic Union (UCR) political party who served as President of Argentina from 10 December 1999 to 21 December 2001. De la Rúa was born in Córdoba;he entered politics after graduating with a degree in law. He was elected senator in 1973 and unsuccessfully ran for the office of Vice President as Ricardo Balbín's running mate the same year. He was re-elected senator in 1983 and 1993,and as deputy in 1991. He unsuccessfully opposed the pact of Olivos between President Carlos Menem and party leader Raúl Alfonsín,which enabled the 1994 amendment of the Argentine Constitution and the re-election of Menem in 1995.
The 1998–2002 Argentine great depression was an economic depression in Argentina,which began in the third quarter of 1998 and lasted until the second quarter of 2002. It followed fifteen years of stagnation and a brief period of free-market reforms. The depression,which began after the Russian and Brazilian financial crises,caused widespread unemployment,riots,the fall of the government,a default on the country's foreign debt,the rise of alternative currencies and the end of the peso's fixed exchange rate to the US dollar. The economy shrank by 28 per cent from 1998 to 2002. In terms of income,over 50 per cent of Argentines lived below the official poverty line and 25 per cent were indigent;seven out of ten Argentine children were poor at the depth of the crisis in 2002.
The December 2001 crisis,sometimes known as the Argentinazo,was a period of civil unrest and rioting in Argentina,which took place during December 2001,with the most violent incidents taking place on 19 and 20 December in the capital,Buenos Aires,Rosario and other large cities around the country. It was preceded by a popular revolt against the Argentine government,rallying behind the motto "All of them must go!",which caused the resignation of then-president Fernando de la Rúa,giving way to a period of political instability during which five government officials performed the duties of the Argentine presidency. This period of instability occurred during the larger period of crisis known as the Argentine great depression,an economic,political,and social crisis that lasted from 1998 until 2002.
The Convertibility plan was a plan by the Argentine Currency Board that pegged the Argentine peso to the U.S. dollar between 1991 and 2002 in an attempt to eliminate hyperinflation and stimulate economic growth. While it initially met with considerable success,the board's actions ultimately failed. The peso was only pegged to the dollar until 2002.
The Central Bank of the Argentine Republic is the central bank of Argentina,being an autarchic entity.
JoséAlfredo Martínez de Hoz was an Argentine lawyer,businessman,and economist. He was the Minister of Economy of Argentina during the country's last military dictatorship (1976—1983),and shaped the economic policy of the dictatorship until its end.
Roque Benjamín Fernández is an Argentine economist,former President of the Central Bank and Minister of Economy,and the only member of the Chicago Boys ever to have been the chief economic policy maker in Argentina.
The Argentine general election of 1995 was held on 14 May. Voters chose both the President and their legislators and with a turnout of 82.1%.
Argentina held presidential elections on 24 October 1999. Legislative elections were held on four dates,8 August,12 September,26 September and 24 October,though most polls took place on 24 October.
Argentina held national legislative elections on 26 October 1997. This election was the second time of the peronist Justicialist Party defeated since 1985,while Justicialist Party maintained control of the Congress.
The Argentine legislative elections of 1991 were held on four dates,11 August,8 September,27 October and 1 December,though most polls took place on 8 September. Voters chose their legislators and governors and,with a turnout of 80%.
The Argentine legislative elections of 1993 were held on 3 October. Voters chose their legislators and,with a turnout of 80.3%.
Javier González Fraga is an Argentine economist and businessman. He served as President of the Central Bank of Argentina from 1989 to 1991,and was nominated as running-mate by Ricardo Alfonsín for his 2011 campaign for the Presidency.
Carlos Menem was president of Argentina from 1989 to 1999.
Fernando de la Rúa's tenure as president of Argentina began when he took office on 10 December 1999,and ended with his resignation on 21 December 2001 in the wake of the December 2001 crisis.
The BONEX Plan was a forced conversion of bank time deposits to Treasury bonds performed by the Argentine government in January 1990.
1 2 Our World in Data based on Feenstra, Robert C., Robert Inklaar and Marcel P. Timmer (2015), "The Next Generation of the Penn World Table" American Economic Review, 105(10), 3150-3182, available for download at www.ggdc.net/pwt. PWT v9.1
↑ Starr, Pamela K. (1997). "Government Coalitions and the Viability of Currency Boards: Argentina under the Cavallo Plan". Journal of Interamerican Studies and World Affairs. 39 (2): 83–133. doi:10.2307/166512. JSTOR166512.
↑ Cavallo, Domingo; Runde, Sonia Cavallo (2017). Argentina's Economic Reforms of the 1990s in Contemporary and Historical Perspective. Routledge. ISBN978-1857438048.
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