Domingo Cavallo

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.

Domingo Felipe Cavallo (born July 21, 1946) is an Argentine economist and politician.

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 graduated with honors in Accounting (1967) and Economics (1968) at the National University of Córdoba, where he earned his doctorate in economics in 1970.

He married the former Sonia Abrazián in 1968, and had three children.

Cavallo taught at the National University of Córdoba (1969–84), the Catholic University of Córdoba (1970–74), and New York University (1996–97).

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.

He would later enroll at Harvard University, where he earned a second doctorate in Economics in 1977.

Implemented in 1980 at the behest of conservative Minister of Economy, José Alfredo 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.

Cavallo immediately rescinded the hated Circular 1050 and as a result, saved millions of homeowners and small-business owners from financial ruin (as well as millions more, indirectly).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.

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.

In July 1982, after the Falklands War fiasco brought more moderate leadership to the military dictatorship, Cavallo was appointed president of the Central Bank.

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.

This controversy notwithstanding, upon Argentina's return to democracy in December 1983, he became a close economic advisor to Peronist politician José Manuel 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 Foreign Minister, in 1989 he met with British Foreign Secretary John Major, this being the first such meeting since the end of the Falklands War seven years earlier.

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. President George H. W. Bush.

This brought the inflation rate down from over 1,300% in 1990 to less than 20% in 1992 and nearly to zero during the rest of the 1990s.

He implemented pro-market reforms which included privatizations of state enterprises.

Productivity per hour worked during his five-years as minister of Menem increased by more than 100%.

Between 1991 and 1996, he was the Minister of Economy during Carlos Menem's presidency.

He is known for implementing the convertibility plan, which established a pseudo-currency board with the United States dollar and allowed the dollar to be used for legal contracts.

He wrote a number of books and was publisher of Forbes in 1998–99.

In 2001, he was the economy minister for nine months during the 1998–2002 Argentine great depression.

During a bank run, he implemented a restriction on cash withdrawing, known as corralito.

This was followed by the December 2001 riots in Argentina and the fall of Fernando de la Rúa as president.

Cavallo is a Doctor in Economic Sciences from the National University of Córdoba and obtained his PhD in Economics from Harvard University.

He received five Honoris Causa doctorates from Genoa, Turin, Bologna, Ben-Gurion and Paris Pantheon-Sorbonne universities.

He was professor at the National and Catholic Universities of Córdoba, and at New York, Harvard, and Yale universities.

Cavallo was born in San Francisco, Córdoba Province to Florencia and Felipe Cavallo, Italian Argentine immigrants from the Piedmont Region.