Former Argentinian minister arrested in arms sales inquiry

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A former economy minister in Argentina was in a military prison yesterday after being arrested as part of an inquiry into illegal arms trafficking during the 1990s.

Domingo Cavallo, once hailed as a financial miracle worker before being driven from office by violent street protests, was questioned by a federal judge about an alleged conspiracy to smuggle arms to Croatia and Ecuador between 1991 and 1995, when Mr Cavallo was the chief economic minister under the former president Carlos Menem.

As one of Mr Menem's senior aides, Mr Cavallo signed decrees authorising the sales of some 6,500 tonnes of weapons officially listed as bound for Panama and Venezuela. But they ended up in Croatia and Ecuador. Prosecutors say the shipments of cannons and gunpowder, valued at more than £70m, entered those countries in violation of international arms embargoes.

Mr Menem was accused of leading the smuggling ring and placed under house arrest last year. However, he was released after the Supreme Court dismissed the charges. Several of the former president's aides have also been detained and later released.

Mr Cavallo, a Harvard-trained economist, was credited with turning around Argentina's inflation-racked economy by pegging the Argentine peso one-to-one with the US dollar during his first stint as Economy Minister from 1991 to 1996. Mr Cavallo, 55, returned to office last year, joining then-president Fernando de la Rua in an effort to pull Argentina from a deep recession. But his belt-tightening policies and a decision to freeze bank accounts to halt a run on banks proved highly unpopular, and he was forced to step down in December, along with Mr De la Rua. (AP)