Cavallo’s take-charge way has some political cartoonists in Buenos Aires calling him Domingo I. The 54-year-old minister is riding a wave of popularity as he settles back into his old job and he has wasted no time seizing the initiative. In his first week he visited Spain and Brazil, announced sweeping tax reforms and managed to get Congress to convene over the weekend for the first time in a decade to push through an economic emergency package. Congress balked at giving the man who would be king a blank check and attempted to water down the powers. But Federico Thomsen, equity-markets director for investment bank ING Barings, says Cavallo saw that coming. “He asked for the moon, because he knows how the game is played. That’s why you see him smiling a lot. I doubt he’s lost much that he cares about.”
Argentines flock to the sight of a man–or woman–on a balcony promising them deliverance from their latest round of woes, and Cavallo has some impressive credentials for the role of national savior. He first won acclaim in 1991 when he ended months of hyperinflation by pegging the Argentine peso to the dollar under Menem. Nearly three fourths of Argentines have approved his reincarnation as economic czar in a recent poll. Cavallo knows he is in a position to call the shots, since the government cannot afford the resignation of another economy minister–Cavallo’s predecessor lasted just 14 days. What’s more, Menem’s charismatic leadership helped keep Cavallo in check. De la Rua’s indecisiveness is now legendary and the arrival of Cavallo has made him look increasingly irrelevant. “The president’s power has been diluted,” declared former Interior minister Federico Storani. “The government revolves around [Cavallo].”
Cavallo’s first move was not that different from his predecessors–a massive new tax on financial transactions to get the fiscal deficit under control. But he has also announced less orthodox measures like a hike in duties on manufactured imports. In the longer term he promises to use his new powers to shake up the inefficient state bureaucracy, although it is unclear exactly how. Even so, the reception outside Argentina has been enthusiastic, and his proposals have already garnered the International Monetary Fund’s all-important seal of approval. “He is one of the few people in Argentina capable of convincing foreign investors to put in even one more dollar,” says Norberto Sosa, an economic analyst for the American investment firm Raymond James Bank.
Not everyone in Argentina is that thrilled by the return of Domingo Cavallo. Some members of the governing alliance have already resigned in disgust and the remainder view his appointment as a necessary evil. Nevertheless, if he performs another economic miracle, the center-right politician who finished a distant third in the 1999 presidential voting will be a firm candidate for the next election in 2003. And if Cavallo falters, he can always blame it on the impossible mess that he inherited when he joined the de la Rua government. For now he is back where he likes to be–center stage–and reveling in it.
