Mingo's new songsheet

Argentines are divided over the merits of Domingo Cavallo their new minister of economics, reports Hisham El-Naggar from Buenos Aires
He is back. Domingo Cavallo, Mingo to his friends, the architect of Argentina's "convertibility plan" which is widely credited with annihilating hyperinflation, is back at the helm of the Ministry of Economics at a critical moment for Argentina's economy.
Cavallo's appointment as economics minister by President Fernando de la Rua marks the end of four days of wild speculation. This fevered uncertainty was a result of the economic plan devised to meet the nation's difficulties by Ricardo Lopez Murphy, de la Rua's previous appointee. Lopez Murphy's future was hurled into doubt when his plan failed to elicit a hint of support from the country's feuding and increasingly ill-humored politicians.
They, and the rest of the country, have much to be ill-humored about. The deep recession into which Brazil's devaluation plunged the Argentine economy is still going strong, long after Brazil's own near complete recovery. Depressed economic activity has translated into lower tax receipts, causing a stubborn budget deficit that is making the country's creditors jittery. So jittery, indeed, that at the end of last year Argentina was considered to be on the verge of default.
At the time, the IMF 'came to the rescue' with an aid package, pushed through by Jose Luis Machinea, the then economics minister. The price of the providential package was a raft of unpopular measures which many warned would delay recovery. But heedless of these concerns, the IMF and its ministerial advocate bulldozed on.
The machinations of Machinea failed. After three months, tax receipts were as depressed as ever -- not surprisingly given that taxes had been raised merely to mollify the IMF. Foreign creditors panicked and the IMF package seemed ready to collapse.
Out went Machinea and in came Lopez Murphy, a Chicago-trained economist with impeccable conservative credentials. The IMF, never shy of offering help, sent a team to Buenos Aires. From the maw of their overactive sausage machine came a new plan consisting of deep budget cuts, notably in education. The plan was a neoliberal's dream. It mauled the public university budget so badly that, if Lopez Murphy had had his way, free university education would have gone the way of the dodo. Bonuses promised to teachers were forgotten, and funds allocated to poorer provinces hung in the balance.
But the IMF had overlooked one crucial element: the Argentinian people. At last roused, they unmistakably showed their impatience with the policies dreamt up by the IMF for their betterment. Labour unions called for strikes, university students took to the streets, provincial governors frowned and the press howled. Worse, several ministers from de la Rua's cabinet resigned. Political support, which Lopez Murphy had left others to muster, was gone.
The enterprising de la Rua then turned from Lopez Murphy to Domingo Cavallo, who only the year before had tried to seize the capital's City Hall from de la Rua himself, in a rancorous (and unsuccessful) campaign. But political expediency has a way of healing old enmities. Though Cavallo had openly flirted with factions of the opposition Peronist Party, de la Rua reckoned that Cavallo's record and international prestige would come in handy at such a critical moment for the economy.
This seems to be Cavallo's opinion, too. Never shy of presenting himself as Argentina's saviour, he leapt at de la Rua's offer of the post of Cabinet coordinator on Sunday: a mere two days after Lopez Murphy announced his stillborn recovery plan. A nerve-wracking Monday followed, with Lopez Murphy still at the Economics Ministry. But in the small hours of Tuesday morning, Lopez Murphy bowed to the inevitable and resigned. With almost unseemly haste, de la Rua then presented an exultant Cavallo to the press as his new economics minister.
In consequence, the mood in Argentina has improved but not much. Financial markets remain shy (Wall Street's own woes hardly help) and polls show Argentines more or less evenly divided on the merits of Cavallo.
Cavallo himself has wasted no time in distancing himself from his predecessors. Despite his fame as a confirmed neoliberal with ties to international business, Cavallo now appears inclined to sing a different tune, or at least to be perceived as doing so. The package he sent to Congress, as well as asking for extraordinary legislative powers, calls for raised tariffs on consumer goods and a bigger tax on checking accounts. But lest this alarm his former friends at the IMF, Cavallo has asserted that his convertibility plan is not in danger. And he has ruled out devaluation.
Nevertheless, these policies are far from the neoliberalism that Cavallo once championed. But Cavallo is far from the man he once was. During his months out of power, he has recast himself as a politician: and politicians have a knack for telling people what they want to hear (in this case, no crippling budget cuts and protection for ailing national industries).
It is plain that Cavallo has to play to two audiences: foreign investors and the long-forgotten Argentines themselves, who must be led out of the doldrums if the economy is ever to recover. So far Cavallo has serenaded both sides well. But as difficult choices have to be made, he may find some of the notes on his new songsheet a little hard to reach.
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