25 people were killed during the events of last december (2001) where the Argentine peoples took the streets to claim for Cavallo' s resignation. 400 resulted wounded.Up to now, nobody has taken the responsability for any of the facts (be them economical, or political)

Here, some accounts on December' s events: the conditions in which Cavallo resigned. (Articles in Spanish and in English)

 

 

Diario LA TERCERA- Chile

CAMINO AL DESASTRE

La caída del padre de la convertibilidad argentina

Despojado de sus súper poderes, atemorizado por la conmoción social que llegó hasta las puertas de su casa e impedido de abandonar el país por tres jueces, Domingo Cavallo abandonó el ministerio de Economía nueve meses después de haber sido convocado por el presidente Fernando de la Rúa como el "salvador" de la economía argentina.
Sin apoyo político ni popular, Cavallo (55 años) renunció en la madrugada del miércoles 20 de diciembre del 2001, en medio de la peor crisis de los últimos 50 años. Mediante una carta titulada "Querido Amigo", Cavallo presentó su renuncia tras admitir que se había convertido en un obstáculo para De la Rúa en su intento por recuperar el país.
Vehemente y con numerosos adversarios, Cavallo repitió incansablemente en los últimos meses que no dejaría su cargo. La realidad demostró lo contrario, y hasta debió salir ayer a escondidas de su domicilio particular por temor a ser agredido físicamente.

A ello se sumó la prohibición a Cavallo de abandonar el país sin una autorización judicial previa dipuesta por tres jueces de distintos fueros. El juez Julio Speroni dictó la primera prohibición ayer por la mañana. El magistrado tiene a su cargo la investigación sobre el presunto delito de contrabando cometido en la venta ilegal de armas a Croacia y Ecuador.
Horas más tarde se conocieron resoluciones similares de los jueces federales Jorge Luis Ballestero y Rodolfo Canicoba Corral, quienes investigan, respectivamente, la operación de megacanje de la deuda que efectuó Cavallo a mediados de este año y el otorgamiento de fondos para la lucha contra el narcotráfico.

La policía federal mantuvo ayer un fuerte dispositivo de seguridad en torno al domicilio de Cavallo, quien ocupa un apartamento en un lujoso edificio en la zona residencial de Palermo de esta capital. Desde el miércoles por las noche varios miles de personas se reunieron frente al edificio y profirieron gritos hostiles contra Cavallo y exigieron su renuncia. Cavallo logró eludir el cerco periodístico y abandonó su apartamento con destino desconocido.Su historia

Nacido en Córdoba y doctorado en Economía en la Universidad de Harvard, desde muy joven destacó por sus importantes cargos financieros. A los 21 años ocupó la Subsecretaría de Desarrollo y Planeamiento Provincial. Tiempo después, en 1982, presidió el Banco Central. Luego de esta experiencia decidió incursionar en política. Así en 1987, representando al Partido Justicialista, fue electo diputado por la provincia de Córdova.

Con la llegada de Carlos Menem a la presidencia, fue nombrado en 1989 como ministro de Relaciones Exteriores. Dos años más tarde aceptó el cargo que le cambiaría para siempre su currículum: hasta 1996 se desempeñó como ministro de Economía. Desde ese cargo, Cavallo impulsó la ley de Convertibilidad que impulsó en 1991 y que sacó al país de la hiperinflación al fijar el valor de un peso al de un dólar. El mismo sistema que en estos días es fuertemente cuestionado y que está a un paso de caer.
Al alejarse del justicialismo, fundó en 1997 el partido Acción por la República, que se ha convertido en la tercera fuerza política del país. El mismo año fue elegido diputado y dos más tarde fue candidato presidencial.
Llamado por De la Rúa, Cavallo sucedió en el puesto a Ricardo López Murphy. En sus nueve meses al frente del ministerio de Economía, Cavallo impulsó severos ajustes del gasto público que incluyeron recortes del 13% a los salarios de empleados públicos y jubilados y que fueron severamente resistidos por la población.

"Querido amigo" se titula la carta que envió Domingo Cavallo a Fernando de la Rúa presentando su renuncia indeclinable.
La carta de renuncia del "súper ministro"
Horas después de la renuncia de Domingo Cavallo, el Ministerio de Economía difundió la carta de dimisión que el ex funcionario envió al hasta jueves 20 de diciembre de 2001 Presidente Fernando de la Rúa. Encabezada con "Querido Amigo", Cavallo expresó que "los acontecimientos que son de público conocimiento hacen que mi presencia en el gobierno, lejos de ser una ayuda, se haya constituido en un obstáculo para que usted pueda llevar adelante la importante misión que le ha encomendado el pueblo argentino".
"Con la misma vocación de servicio al país que puse al aceptar su ofrecimiento, le presento mi renuncia indeclinable al cargo con que me honra", agrega la misiva.
Finalmente, Cavallo se despide de De la Rúa diciéndole que "cuente con todo mi apoyo para sacar al país de la angustiosa situación que estamos viviendo". Antes de su renuncia, Domingo Cavallo había perdido los poderes especiales tras una resolución de la Cámara de Diputados.
 ------------------------------------------------------------------------------------------------------------------------------------------------
 


AFTER ARGENTINA

Convertibility is finished. But the repercussions for other emerging markets and the international financial architecture are just beginning, writes Martin Wolf
Financial Times

Published: December 20 2001 19:37 | Last Updated: December 21 2001 07:55

Argentina's reckless rectitude has foundered on the rocks of popular protest. With the departure of Domingo Cavallo, economics minister and creator of the convertibility plan, the country faces the possibility of a political collapse.
This denouement is no surprise: the economy is in its fourth year of recession; unemployment is at 18 per cent of the labour force; and the government is defaulting. The government's plan to cut spending by $9.2bn, nearly a fifth of the total, was the last play of a hopeless game.

Yet transparency has also shown its virtues. As Kenneth Rogoff, the International Monetary Fund's new chief economist, remarked this week: "It is clear that the mix of fiscal policy, debt and the exchange rate regime is not sustainable." Because the crisis has been predictable, there may be minimal contagion to other borrowers. The latest spread of Argentine dollar bonds over US Treasuries is more than 4,000 basis points (40 percentage points). But Brazil's spread is 880, Mexico's 320 and South Korea's 120.
A global financial system that incorporates many economies with weak financial systems, poor fiscal discipline or histories of monetary profligacy is prone to such crises. For this reason, the debate over improvements to what is called "the international financial architecture" is never-ending. But its intensity varies with the immediacy of crises. Argentina's plight will give it new urgency in three areas: exchange rate regimes and indebtedness; IMF surveillance and support; and "private sector involvement" or, more bluntly, sovereign bankruptcy.

First, the wisdom on exchange rate regimes and fiscal policy is going to change, once again. After the unhappy fate of adjustable peg exchange rate regimes in the east Asian crises of 1997 and 1998, conventional wisdom moved towards support for a "two-corner" world, with freely floating rates at one end and currency boards, currency unions or adoption of another country's currency as one's own at the other. Argentina's fate is certain to dent the plausibility of currency boards and, perhaps, of other hard currency regimes.
Argentina shows that any regime associated with a long economic decline is vulnerable. If, as in Argentina, the economy is inflexible, such a long economic decline is quite likely under an irrevocably fixed exchange rate, particularly in a country vulnerable to external shocks. The likely conclusion from the Argentinian disaster is greater unwillingness to support currency boards. Even dollarisation is no panacea. A country would then avoid monetary meltdown but fiscal collapse is quite feasible under dollarisation.

For this reason, the view of the indebtedness that can be borne by emerging market economies will also change. By the standards of a developed economy, Argentina's ratio of public debt to gross domestic product, at 55 per cent, looks sustainable. But it is unsustainable at real interest rates of more than 10 per cent. Unless a country has extraordinary growth potential or a captive domestic financial market, it cannot allow public sector indebtedness to reach such levels, particularly if debt is denominated in foreign currency.

Second, the role of the IMF will, once again, be put under the microscope. The story of Argentina's fall illustrates the difficulty faced by the IMF in avoiding capture by its borrowers. Senior officials at the Fund argue that the Fund is caught in a trap. If it refuses to support the government, it will be blamed for the chaos that follows a default. If it agrees to support the government, it will be blamed for any failure. It cannot win.

Yet governments of leading high-income countries are likely to be irritated by the way they have been dragged, willy-nilly, behind Argentina's careering chariot. One proposal to address this is from Gordon Brown, the UK's finance minister. In a speech last month, he argued for making IMF surveillance "more transparent, more independent and, therefore, more authoritative".* If an independent report argued that a policy was unsustainable, it would be far more difficult for the IMF board to lend it support. If the staff knew this, it should find it far easier to say no. The idea is intriguing. But escaping from the past is enormously difficult, for borrowers and lenders. Too often they continue until catastrophe strikes.

Third, the question of sovereign bankruptcy procedures now seems still more urgent. Argentina is a particularly important case, because it is the largest sovereign insolvency ever, at least in dollar terms. Anne Krueger, the recently appointed first deputy managing director of the IMF, enhanced the credibility of proposals for orderly restructuring of sovereign debt with a speech delivered on November 26.**
Her proposal had four elements: a mechanism to prevent creditors from disrupting negotiations by seeking repayment through domestic courts; a mechanism to enforce responsible behaviour on debtors; a way to encourage lenders to provide new money; and a way to bind minority creditors into a restructuring arrangements. These ideas are not new. What is new is their provenance.

Yet such a mechanism, however desirable, will be difficult to establish. As Mrs Krueger remarked, "the political imponderable is whether our members are prepared to constrain the ability of their citizens to pursue foreign governments through their national courts as an investment in a more stable - and therefore more prosperous - world economy."
Predictably, there is much opposition to such ideas. Moreover, as the Institute for International Finance - the trade union of lenders - has noted in its response, it would take years for them to be enacted. Edwin Truman, a former senior official at the US Federal Reserve and the US Treasury, has also noted that bankruptcy procedures are the wrong answer if a country is confronted by a short-term panic.***

Providing large-scale official funds makes sense in such situations, as the recovery of Mexico from its crisis of 1994-95 and of South Korea from the turmoil of 1997-98 have demonstrated. Mr Truman argues that more short-term liquidity is the answer. He calls for an "International Financial Stability Fund", raised by a small tax on all cross-border investment - in effect a tax on the use of the international financial system.

All such ideas for improved policy in borrowers, greater discipline over official lending and ways of handling sovereign insolvency and illiquidity must now be further up the agenda for international financial reform. But none of this will help poor Argentina. The mistakes it has made and the ill luck it has endured are bygones.
In framing a new policy, the Argentine authorities must recognise the reality of default. Once the debt has been restructured, the budget will have to be balanced, because the government has run out of credit. Again, once the maximum of politically feasible pain has been imposed on residents, the rest of it must logically be borne by foreign creditors. Policy must also restore growth. This almost certainly involves a devaluation, whether by floating or by a one-off devaluation, followed by dollarisation. Last, all this must be achieved without throwing away monetary stability again.

Argentina offers a lesson as to the dangers of heroic adherence to inflexible policies. It is one that the world must now learn. But the country is largely on its own in finding an escape from the wreckage.

* Speech to the Federal Reserve Bank, New York, November 16 2001, http://www.hm-treasury .gov.uk
** International Financial Architecture for 2002: A New Approach to Sovereign Debt Restructuring, November 26 2001, www.imf.org
*** Perspectives on External Financial Crises, December 10 2001, www.iie.com

-------------------------------------------------------------------------------------------------------------------------------------------------------------

To learn more:

http://www.stern.nyu.edu/News/news/2001/december/ft1205.html