Argentina vows to end recession

Mr de la Rua (left) swears in his new economy minister

Argentina's new economic chief Domingo Cavallo has pledged to get the country's finances back on track after 33 months of recession.

Mr Cavallo was sworn in as a cabinet member of President's Fernando de la Rua's government on Tuesday.

He replaces Ricardo Lopez Murphy and is Argentina's third economy minister in as many months.

President de la Rua has appointed three economy ministers since March

Mr Cavallo has vowed to "create jobs, improve family incomes, get people to buy more and end this three-year recession".

The new minister, who is credited with combating hyper-inflation when he served as finance chief during the early 1990s, quickly rejected calls by some economists to abandon a currency peg linking the peso to the US dollar.

He introduced currency controls a decade ago to help bring down high levels of inflation and many are hoping he will work a similar miracle to pull Argentina out of its economic misery.

Economic misery

Unemployment in Argentina is near 15% and the country is saddled with a ballooning deficit.

The country is also one of the largest emerging-market sovereign borrowers and has $120bn in total foreign debt - close to 50% of its gross domestic product.

In October, Argentina suffered a financial crisis that lasted for months after investors became concerned that the country would not meet its debt obligations.

To ease the constraint on government financing in 2001, the International Monetary Fund agreed a $39.7bn bail-out package with Argentina last December.

But the country's continuing crisis has eroded any boost in optimism following the IMF deal.

Special powers

While Mr Cavallo was finance minister under Carlos Menem during 1991-96, Argentina's industrial growth rose as much as 9% annually.

He is now asking parliament for special powers to push through sweeping spending cuts and to allow Argentina to meet fiscal targets laid out by the IMF.

Teachers and students protested against Mr Lopez Murphy's austerity plan

Mr Cavallo's predecessor - Mr Lopez Murphy - was forced to resign over the unpopularity of his own austerity programme.

The former economy minister had only been in the job for two weeks after replacing Jose Luis Machinea in early March.

Mr Lopez Murphy's $8bn of public spending cuts over three years also prompted the resignation of three cabinet ministers - who opposed the programme - and sparked national protests.

The cuts have now been abandoned and will be superseded by Mr Cavallo's own plan, which will increase the cuts from $2bn to $3bn.

But instead of reducing spending on education, as Mr Lopez Murphy had proposed, Mr Cavallo plans to focus on the "struggle against bureaucracy".

The appointment of Mr Cavallo is popular with Wall Street and the IMF, but he will also need to win the support of the Argentinean public.

Many blame him for the country's high unemployment. When he ran against Mr de la Rua in the 1999 presidential elections, he only won 10% of the public vote.