Domingo Cavallo

Domingo Felipe Cavallo
Born	(1946-07-21) July 21, 1946 San Francisco, Córdoba Province, Argentina
Occupation(s)	Economist, politician, academic
Years active	1965–present
Known for	Minister of Economy of Argentina (1991–1996, 2001), Convertibility Plan, corralito policy

Domingo Felipe Cavallo (born July 21, 1946) is a prominent Argentine economist and political figure. He held the position of Minister of Economy from 1991 until 1996 during President Carlos Menem's administration. In this role, he introduced the convertibility plan, which created a quasi-currency board system that pegged the Argentine peso to the United States dollar. This strategy successfully lowered inflation from an alarming rate exceeding 1,300% in 1990 to below 20% by 1992, maintaining near-zero inflation throughout the remainder of the decade. His period in office was marked by market-oriented reforms and widespread privatization of government-owned companies, resulting in a more than twofold increase in labor productivity.

Cavallo returned to serve as economy minister for a nine-month term in 2001 amid the 1998–2002 Argentine great depression under President Fernando de la Rúa. Confronted with a severe bank run, he implemented the corralito, a policy that limited cash withdrawals, which played a significant role in sparking the December 2001 civil unrest and ultimately led to De la Rúa's resignation.

He earned a Doctorate in Economic Sciences from the National University of Córdoba and obtained a PhD in Economics from Harvard University. Additionally, he has been honored with five honorary doctorates from institutions such as Genoa, Turin, Bologna, Ben-Gurion, and Paris Pantheon-Sorbonne. His academic career includes teaching positions at the National and Catholic Universities of Córdoba as well as at New York University, Harvard, and Yale.

Early years

Born in San Francisco, located in Argentina's Córdoba Province, Cavallo is the son of Florencia and Felipe Cavallo, immigrants from Italy's Piedmont Region. He graduated with distinction in both Accounting (1967) and Economics (1968) at the National University of Córdoba, where he completed his doctorate in economics by 1970. In 1968, he married Sonia Abrazián, with whom he had three children. Later on, he achieved a second doctorate in Economics from Harvard University in 1977.

His teaching career includes appointments at the National University of Córdoba (1969–1984), the Catholic University of Córdoba (1970–1974), and later at New York University (1996–1997). Cavallo has authored multiple books and served as publisher of Forbes magazine during 1998–1999.

Central Bank

In July 1982, amidst Argentina’s post-Falklands War transition toward moderate military governance, Cavallo was named president of the Central Bank. He assumed control during one of the nation’s most severe financial crises since 1930, which included managing the contentious Central Bank Circular 1050.

Originally enacted in 1980 under conservative Minister José Alfredo Martínez de Hoz, Circular 1050 tied adjustable loan payments to fluctuations in the US dollar’s value within Argentina. As the peso experienced significant devaluation beginning February 1981, borrowers faced installment increases that soared more than tenfold within a year, leading to widespread financial distress among mortgage holders and businesses.

Cavallo quickly abolished Circular 1050, thereby preventing millions of homeowners and small enterprises from financial collapse. Nonetheless, his time at the Central Bank remains subject to debate.

Critics have accused him of facilitating policies that allowed large private companies to transfer their debts onto public accounts, effectively converting private liabilities into state obligations. Between 1982 and 1983, over 200 corporations—including thirty economic conglomerates and one hundred six multinational firms—shifted substantial portions of their $17 billion debt burden to the federal government through secured loan exchange rates. Although this debt-shifting practice occurred before and after his brief term at the Central Bank, it did not take place during his leadership. In a speech delivered in September 1982, Cavallo expressed opposition to these debt transfers. The policy originated with Martínez de Hoz; for example, his steel company Acindar transferred $700 million in debts via this mechanism. Additionally, Cavallo instituted indexation on payments guaranteed by exchange rates—a policy later reversed by his successor Julio González del Solar.

Early Political Involvement

Cavallo initiated his political journey as a student representative at the Economics School between 1965 and 1966. He subsequently held positions such as Undersecretary of Development from 1969 to 1970, director and vice chairman of the Provincial Bank between 1971 and 1973, and later served as Undersecretary of Interior at the national level. Following Argentina’s democratic restoration in 1983, he became an economic advisor to the Peronist leader José Manuel de la Sota and secured election as a Peronist deputy representing Córdoba Province in 1987.

Through his think-tank, Fundación Mediterránea, Cavallo assembled an economic advisory team and actively backed Carlos Menem’s presidential bid in 1989. The previous administration’s inability to curb hyperinflation triggered widespread social unrest, culminating in President Alfonsín’s resignation.

Foreign Affairs Leadership

In 1989, Cavallo was appointed Foreign Minister, where he played a pivotal role in reshaping Argentina’s diplomatic relations. Notably, he arranged a landmark meeting with British Foreign Secretary John Major, marking the first such engagement since the Falklands conflict. Although initially excluded from directing economic policy—since Menem entrusted this area to executives from Bunge y Born—Cavallo was instrumental in steering Argentina towards the Washington Consensus framework under U.S. President George H. W. Bush. He took over as Economy Minister in February 1991 amid continuing economic turmoil.

Economy Ministry under Menem

Confronted with a deep economic crisis, President Menem shifted away from traditional Peronist policies toward fiscally conservative, market-driven reforms.

Upon his appointment as Economy Minister in 1991, Cavallo intensified liberalization efforts by abolishing export taxes, lowering import tariffs, removing non-tariff barriers, and opening the economy to foreign capital. He oversaw comprehensive state restructuring through privatization of over 200 public enterprises—including railways, the oil monopoly Yacimientos Petrolíferos Fiscales, utilities, media companies, highways, steel mills, and petrochemical plants—and dismantled controls on prices, wages, and currency exchange. Tax reforms streamlined revenue collection, reduced government expenditures, and aligned with the International Monetary Fund’s debt restructuring under the Brady Plan.

These measures brought economic stability: capital outflows halted, interest rates declined, inflation dropped to single digits, and GDP expanded by 10.5% in 1991 alone. Cavallo’s hallmark reform was the Convertibility Plan launched in April 1991, which established a currency board fixing the peso one-to-one with the US dollar—effectively ending hyperinflation that had soared to 5000% in 1989.

While Menem had already privatized major state assets like telecommunications and national airlines, Cavallo extended privatization across various sectors including provincial banks sold to global financial institutions and introduced private pension funds modeled after Chile’s system.

Between early 1991 and late 1994, GDP grew by approximately one-third; fixed investment more than doubled. Consumers benefited from poverty rates halving to below 20% and a fivefold surge in automobile sales. However, stringent federal budget constraints limited fiscal improvements at the provincial level. Despite productivity gains translating into wage increases for many employees, layoffs linked to privatizations caused unemployment to rise from around 7% during 1991–92 to over 12% by 1994.

The Mexican financial crisis of 1995 further eroded confidence, pushing unemployment up to 18%, its highest level since the 1930s. Although economic growth resumed by early 1996, persistently high unemployment contributed to increased crime rates and only gradual poverty reduction.

Independent

In mid-1995, Cavallo revealed alleged "mafia" networks within influential power structures, which created tensions with President Menem and his administration. After Menem secured reelection in 1996, the flow of privatisation revenues ceased. Facing growing unemployment and social unrest linked to his economic strategies and the Mexican crisis, Cavallo was compelled to step down on July 26, 1996.

Subsequently, he established the political party Action for the Republic and made a comeback to Congress in 1997 as a National Deputy representing the City of Buenos Aires. In the 1999 presidential race, Cavallo finished third, capturing 11% of votes behind Fernando de la Rúa and Peronist candidate Eduardo Duhalde. Additionally, he contested the Mayor of Buenos Aires position in 2000, where he placed second to Aníbal Ibarra.

Minister of Economy with de la Rúa and during the crisis

In March 2001, amid an economic downturn and a fragile coalition government, President de la Rúa appointed Cavallo as Minister of Economy. His objective was to revive business confidence by renegotiating external debt with the International Monetary Fund and bondholders. Despite these efforts, rising country risk, investor put options, and capital flight led to a banking crisis.

November 2001 saw Cavallo introduce the corralito, a policy restricting cash withdrawals that ignited widespread middle-class protests known as the cacerolazo. The combination of political opposition and economic strain culminated in the December 2001 riots, which ultimately forced both Cavallo and de la Rúa to resign.

After a period marked by rapid changes in leadership, Eduardo Duhalde assumed the presidency in January 2002. His administration ended peso-dollar convertibility, devalued the peso, and allowed it to float freely. This resulted in swift currency depreciation—reaching 4 pesos per dollar by July 2002—and inflation approaching 40%.

Cavallo’s economic policies have been widely criticized for their role in accelerating Argentina’s late-1990s deindustrialization, escalating unemployment, poverty, crime rates, and contributing to the profound economic collapse that culminated in the 2001 sovereign debt default.

After the crisis

Between April and June 2002, Cavallo was detained over accusations related to illegal arms trafficking during Menem's presidency but was cleared of all charges by 2005.

From 2003 to 2004, he held the position of Robert Kennedy Visiting Professor in Latin American Studies within Harvard University's economics department. During this period, he also maintained membership in the prestigious Washington-based financial advisory body known as the Group of Thirty.

By January 2012, Cavallo had become a senior fellow at Yale University's Jackson Institute for Global Affairs and served as a visiting lecturer in its economics department.

In 2013, Cavallo returned to Córdoba Province to seek election to the Chamber of Deputies on the Es Posible list led by center-right Peronist Alberto Rodríguez Saá. Receiving only 1.28% of votes, he failed to surpass the 1.5% minimum required in primaries and was consequently excluded from the general election—a significant electoral setback.

Criminal conviction

On December 1, 2015, Cavallo, along with former president Carlos Saul Menem and ex-justice minister Raúl Granillo Ocampo, was convicted of embezzlement by the Tribunal Oral Federal 4.

International recognition

• : Awarded the title of Honorary Commander of the Order of the Defender of the Realm (P.M.N.) in 1994

External links

• Official personal website (available in Spanish and English)