Domingo Cavallo Forecasts Argentina's Economy

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Former Argentine Minister of Economy Domingo Cavallo reveals his views on the Argentine Economy and its future performance in the June 30 issue of Latin American Law & Business Report.

Former Argentine Minister of Economy Domingo Cavallo reveals his views on the Argentine Economy and its future performance in the June 30 issue of Latin American Law & Business Report. In this exclusive interview, Cavallo states that politics undid his reforms and caused the financial meltdown of 2001. To regain long-term growth, Argentina must reestablish a healthy investment climate by returning to the rule of law.

Perhaps no one is better qualified to look at where the Argentine economy went wrong, and how to repair the damage, than Domingo Cavallo. As architect of Argentina's convertibility law and privatization program, he killed inflation, opened Argentina's markets and presided over a rush of investments. Today however, many Argentines trace the causes of the default and devaluation of January 2002 to the changes of the 90s and his time in office.

From 1991 to 1997—the year after Cavallo left the government—the economy expanded by an average of 6 percent a year. In January 2002, the Argentine debt default and currency devaluation pushed the economy over the cliff. Banks closed, and depositors saw the value of their life savings evaporate. How did the economy go so wrong?

Much of the cause of the financial meltdown of January 2002 can be attributed to politics. [Former president] Carlos Menem and Eduardo Duhalde permitted the Argentine provinces to borrow way too much as they were vying to win the presidential candidate nomination from the Peronist party. The excessive borrowing by the provinces eroded the value of the assets in Argentine banks. When the real value of the collateral was revealed, the banking house of cards fell.

Argentina’s economy returned to surprising growth last year, when GDP accelerate by more than 8 percent. But the long-term picture could be different, Cavallo says. These views on the economy, rule of law, and pesofication, as well as forecasts of future performance, are published in the June 30 Latin American Law and Business Report.

Latin America Law and Business Report is published by WorldTrade Executive, Inc., a leading publisher of international business, finance and tax information services designed to help businesses succeed worldwide. For a complete list of publications, go to http://www.wtexec.com.

PR contact: Jennifer Baker (978) 287-0301; jbaker@wtexec.com

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