The Second Coming.(Argentinian economic minister Domingo Cavallo works to bring country out of recession)

It was a tour de force worthy of the wizard who tamed Argentina's four- digit inflation 10 years ago. Domingo Cavallo flew home at the end of a three-day sweep through New York, London and Madrid two weeks ago with good news for his anxious countrymen. The Economy minister had convinced foreign bankers and government officials to trade nearly $30 billion in short-term Argentine bonds for longer-term instruments, many of which won't fall due until 2005. That bought Buenos Aires crucial breathing room to tame an economy speeding toward calamity. "We have defeated those who were betting against Argentina," declared the hyperactive, Harvard-educated economist. "Now we are heading toward what is really important: economic growth in Argentina."

The blithe self-confidence is classic Cavallo. Though his forecast may prove premature, no one could deny that the wildly successful road show had burnished Cavallo's image as the savior of Argentina. Since beleaguered President Fernando de la Rua restored him to the post he occupied under Carlos Menem in the early 1990s, many Argentines have come to see Cavallo as their de facto president. Who could blame them? When the workaholic technocrat joined the government in March, de la Rua ceded extraordinary power, giving him authority to ease regulations on private companies, hunt down tax evaders and unilaterally adjust import tariffs--all with the tacit understanding that only he could break the recession that has plagued Argentina for nearly three years. Ever since, Cavallo, 54, has been as visible as any head of state, making five trips overseas to reassure investors about Argentina's prospects under his stewardship. And he's not a man prone to self- doubt. "He thinks he's God, albeit a humanized God," jokes Buenos Aires pollster Manuel Mora y Araujo. "Sort of like Jesus Christ."

The question is, can he still work miracles? Menem's magic is long gone; the former president was placed under house arrest last week in an investigation of illegal arms sales. Cavallo is riding high, though. The markets' response to his so-called megaswap exceeded his own expectations. But it will take more to heal the crippled economy than merely stretching out Argentina's debt-repayment schedule. At every stop on his 72-hour road show, Cavallo assured American and European audiences that in the second half of 2001, the economy will grow 5 percent faster than it did in the same period last year (box). But observers are adopting a wait-and-see posture, both at home and abroad. "The main problem is the total lack of confidence in the Argentine government, both locally and in international markets," says Pamela Starr, an Argentina specialist at the Autonomous Technological Institute of Mexico. "The economy is in dire straits, and unless it returns to growth soon it will fall into a serious crisis."

Some experts believe Argentina is on the verge of a depression and that only Cavallo can prevent outright default on the country's $128 billion foreign debt. Analysts warn that a suspension of debt payments could trigger a regionwide financial catastrophe, with global ripples. In 1991 Cavallo slew hyperinflation by pegging the Argentine peso to the dollar on a one-to-one basis, ushering in six years of sustained economic growth. But the monsters facing him today are more beastly. Argentina's combined unemployment and underemployment rate is more than 30 percent. Much of the private sector remains paralyzed by interest rates that start at around 30 percent for medium-size businesses. And experts warn that the government will likely need to borrow an additional $12 billion this year to cover its outstanding foreign-debt obligations. Small wonder that Argentina's country risk rating was recently downgraded to a B, putting what was once Latin America's richest nation below Chile and on a par with Bolivia.

None of this seems to faze the messiah of Buenos Aires. "Once we complete this megaswap, the fears of a ...