Argentine Economy Minister Is Ousted

President Carlos Menem on Friday announced the resignation of Domingo Cavallo, the economy minister and architect of Argentina’s economic stabilization program, amid discontent with high unemployment and austerity measures imposed by an administration showing signs of disarray.

“All phases come to an end,” Menem told a news conference Friday night. “Dr. Cavallo completed an exceptional phase at the helm of the economy. And therefore, I decided . . . to request his resignation.”

Cavallo, 50, was credited with wiping out the hyper-inflation that has plagued the country and carrying out a historic reduction of the role of the state in the Argentine economy. His dismissal caused concern in the diplomatic and business communities, where he was regarded as a force for reform.

The Argentine stock market fell 3.6% Friday just on rumors of his ouster.

But there were celebrations among politicians and citizens, who blamed Cavallo for unemployment that rose from 6% to 18% in his five-year tenure. Cavallo symbolized government indifference to many working- and middle-class Argentines worried about a decline in their traditional prosperity and the onset of the bitter poverty that afflicts many other Latin American nations.

“Cavallo, you are a corpse,” chanted marchers in the Plaza de Mayo, the government square in downtown Buenos Aires. They pounded drums and set off firecrackers at a labor rally organized to protest Cavallo’s latest austerity package, which cut off a family food subsidy program, excepting only the poor.

A Western diplomat observed: “Cavallo had a stronger base of support overseas than domestically. People were being asked to tighten their belts, and no candy bar was offered in exchange.”

The departure of Cavallo, a cerebral and mercurial technocrat educated at Harvard, shook an administration that is suddenly struggling. In the past month, corruption scandals forced out the justice and defense ministers and the ruling Peronist Party lost elections in Buenos Aires.

Menem confronts a crisis just a year after winning reelection. He dismissed Cavallo after encountering resistance to the economy minister’s program from Peronist leaders who were unhappy with pending reforms such as cuts in social security and provincial government payrolls. Those are popular with the financial establishment but not with working Argentines, said Jorge Castro, editor of El Cronista newspaper.

He noted, “Cavallo fell, but this crisis remains open.”

Despite impressive economic progress, the 13-year-old Argentine democracy must overcome deep-seated problems of corruption and political infighting, Castro said.

Menem said new Economy Minister Roque Fernandez would make no major policy changes.

Fernandez, 49, a free-market economist educated at the University of Chicago, is the president of the Central Bank and a friend of Cavallo’s.

Cavallo fell after a dramatic year in which he feuded with Menem and other ministers, accused prominent political figures of corruption and reportedly threatened to resign if his programs were blocked.