Mr Domingo Cavallo, who won the praise of the IMF during a decade as economy minister, was in custody today on suspicion that he smuggled arms to Croatia and Ecuador, court sources said.
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Former Argentine Economy Minister Domingo Cavallo is seen in speaking at during a press conference.
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Mr Cavallo was arrested after testifying more than an hour, according to court officials. He remains under arrest in a Buenos Aires jail.
Former president Mr Carlos Menem, who has announced his candidacy in Argentina's upcoming presidential elections, spent more than five months under house arrest last year, facing similar accusations that he smuggled arms to Croatia and Ecuador between 1991 and 1996, while Mr Cavallo was economy minister.
It was also under the Menem administration that Mr Cavallo pegged the Argentine peso to the US dollar, a policy that lasted more than a decade. Mr Cavallo's free-market policies made Argentina a showcase for International Monetary Fund policies.
Mr Cavallo also served president Fernando de la Rua, who resigned late last year in the midst of Argentina's economic recession that has now lasted four years.