Domingo Cavallo, July 2001. Announces the goal of zero deficit.
“I am a legend”.
Domingo Cavallo thus defined himself in front of investors in mid-March 2001 in Santiago de Chile. The Minister of Economy was Ricardo López Murphy. For a few more days, of course.
Cavallo’s phrase became known four months later. It was told by a Bloomberg reporter (John Lyons) to describe the minister’s epic and what he was trying to do.
Cavallo in 2001 was the audacity (perhaps precisely that) to change long-suffering. Unemployment was 17% and activity depressed.
But while everyone remembers that it wasn’t enough, less is known why the minister came with that aura that Lyons described. The hope, or perhaps the despair of surviving what was to come, brought everyone together in the same Noah’s Ark before the Flood and behind a legend.
– “Argentina will emerge from the recession”David Rockefeller and William Rhodes, Citi vice president, told Ezeiza the same day Cavallo took office for the second time, March 20, 2001.
– “It will calm people down”said to Clarione That day Gustavo Cañonero, chief economist of the Deutsche Bank of New York.
– “Horse promotes the heterodox measures that serve”declared Ignacio de Mendiguren, Secretary of the Argentine Industrial Union, now Minister of Production.
– “Sales are on the rise”enthusiastic the president of Fiat and Adefa, Cristiano Rattazzi.
– Chacho Álvarez, political architect of the incorporation of the new minister and then former vice president of that government, has publicly justified his bet: “In a framework to propose a way out of the economic crisis and in the framework of an enlarged government, the incorporation of Cavallo is positive”.
Álvarez estimated that the economy would not only come out of the depression with the new minister, but that GDP would grow by 5%. The landing of Cavallo for the office of Minister of Economy is closed in a meeting in the apartment of Nilda Garré, deputy of Frepaso and later Minister of Defense with Kirchnerism. There were also two economists, former members of Alfonsín’s team and portrayed in Non-Fiction Economics: Juan Sourrouille and Mario Broderson.
The statements by Messrs. Rockefeller, Rhodes, Ratazzi, De Mendiguren and Álvarez were made on the same day Mingo took office.
It is known that forecasts and estimates are, more often than not, a function of past experience. And not what will come.
Cavallo began his second stage at the helm of the Ministry of Economy, just ten years after having inaugurated the convertibility plan.
Quickly, the minister bet on the comparison between one period and another. “You will begin to see results in the coming months, 2001 will be very similar to 1991 in terms of economic performance”said on April 2, 2001.
A New Majority measurement on March 30 revealed that 72% were in favor of the appointment and that he was the politician with the best image of the time (50%).
As reported in Non-Fiction Economics on July 17, Cavallo’s image has really aroused more distrust abroad than at home.
The minister had announced, hardly imagined, that he would present a plan to Congress to carry out the the exchange rate that links the peso not only to the dollar but also to the euro. This raised the specter of a default because it meant Argentina didn’t have the dollars to back the 1 to 1. Ergo, payment of debts in foreign currency; and then the country risk started to skyrocket.
Cavallo used his figure and gathered 500 people at Banco Nación to announce measures aimed at giving signals that the state would have the money to pay the debts and then announced that he would go to zero deficit.
“Top-level businessmen invited to the call, including Paolo Rocca of Techint”recalls a strongman of the Fernando de la Rúa government who then clashed with Cavallo and today prefers anonymity.
“Nobody in the world wants to lend us money and this is destroying the private sector”shouted the minister in the presentation. The country risk, which had started from 900 points at the beginning of the year, was already almost 1,700 points.
That day Cavallo received the support of businessmen and industrialists. They were excited about the easing of convertibility with the euro. “We share the zero deficit criterion. We will have to reactivate ”, said the Industrial Union, in the editions of Clarín and La Nación on Tuesday 17 July, after the presentation of the super-minister in front of those 500 people in the hall of the Banco Nación.
Cavallo preferred the classifieds to be at Banco Nación because it was the same place where he had launched convertibility. Half an hour before the conferences, he gathered the ministers, secretaries and undersecretaries in an adjoining room. Then came journalists, photographers and cameras. And the action began. In just a few minutes he recreated the expectations that captivated 500 people.
Ezechiele Burgo
Source: Clarin
