In July 1982, after the Falklands War fiasco brought more moderate leadership to the military dictatorship, Cavallo was appointed president of the Central Bank.

During 1982 and 1983, more than 200 firms (30 economic groups and 106 transnational enterprises) transferred a great part of their 17 billion dollar debt to the federal government, thanks to secured exchange rates on loan installments.

Moreover, Cavallo subjected payments covered by these exchange rate guarantees to indexation; this latter stipulation was dropped by his successor, Julio González del Solar.

Drawing from his Fundación Mediterránea think-tank, he prepared an academic team for taking over the management of the economy, and to that end he participated actively in Carlos Menem's bid for the presidency in 1989.

[10] As Menem initially chose to deliver the Economy Ministry to senior executives of the firm Bunge y Born, Cavallo had to wait a few more years to put his economic theories into practice.

He served as Menem's foreign minister, and was instrumental in the realignment of Argentina with the Washington Consensus advanced by U.S. President George H. W. Bush.

Finally, after several false starts, and two further peaks of hyperinflation, Menem put Cavallo at the helm of the Argentine Economy Ministry in February, 1991.

Confidence and the economy recovered relatively quickly; but, the consequences of double-digit unemployment soon created a crime wave that to some extent continues to this day.

[18] Cavallo founded a political party, Action for the Republic, which allowed him to return to Congress since 1997, this time as a National Deputy for the City of Buenos Aires.

Cavallo was called by President de la Rúa in March 2001 to lead the economy once again, in the face of a weakened coalition government and two years of recession.

[19] He attempted to restore business confidence by renegotiating the external debt with the International Monetary Fund and with bondholders, but the growing country risk and spiraling put options by large investors and foreign holdings led to a bank run and a massive capital flight.

In late November 2001, Cavallo introduced a set of measures that blocked the usage of cash, informally known as the corralito ("financial corral").

[20] A series of Peronist presidents came and left in the next few days, until Eduardo Duhalde, the opponent of De la Rua and Cavallo in the 1999 presidential election, took power on January 2, 2002.

Cavallo's policies are viewed by opponents as major causes of the deindustrialization and the rise of unemployment, poverty and crime endured by Argentina in the late 1990s, as well as the collapse of 2001, the ensuing default of the Argentine public debt.

[21] Cavallo served as the Robert Kennedy Visiting Professor in Latin American Studies in the department of economics at Harvard University from 2003 to 2004.

Cavallo returned to Córdoba Province in 2013 to run for Chamber of Deputies under the Es Posible ticket, led by center-right Peronist Alberto Rodríguez Saá.

"[23] On December 1, 2015, Cavallo, ex president Carlos Saul Menem, and ex justice minister Raúl Granillo Ocampo, were found guilty of embezzlement by the court Tribunal Oral Federal 4.