Milei’s Reforms Near Passage in Shadow of Argentina Protests

Argentina President Javier Milei achieved a significant victory as his comprehensive reform package was approved by the Senate in two closely contested rounds of voting. This came after violent protests erupted outside the congress building.

Following weeks of tense negotiations, the Senate passed the president’s pro-market plan in a general vote on Wednesday night, with the vice president breaking a 36-36 tie. In a subsequent round of voting, nine individual chapters of the bill were approved, which included provisions for labor reform, privatizations, and granting Milei emergency powers over economic policy.

The protests that took place earlier in the day highlighted the political resistance to Milei’s proposals. Demonstrators threw rocks, broken glass, and Molotov cocktails at riot police as they attempted to clear a nearby plaza using water cannons and tear gas. Additionally, a car was flipped and set on fire by the protesters.
Assuming there are no unexpected setbacks, Milei’s approvals seem to have positioned him for his greatest legislative accomplishment, which investors are likely to celebrate. Although the legislation has undergone significant revisions, it includes measures aimed at enhancing the country’s appeal to employers and business interests. The fact that it is progressing demonstrates Milei’s ability to pass laws despite his contentious relationship with Congress members, whom he continues to criticize.

Diego Pereira, an economist at JPMorgan, stated, “The Milei administration has achieved its first legislative victory, despite having limited representation in Congress.”

The omnibus bill, known as the particular vote, underwent a second round of voting in the Senate, which concluded early Thursday morning. Trading in Argentine sovereign bonds and the parallel exchange rate were suspended as the bill made progress. Both have experienced volatility in recent sessions due to uncertainty surrounding the vote, following a strong rally in previous months.
After the votes, the Senate immediately began discussing fiscal legislation that includes changes to income taxes. If both bills are approved, they will be sent back to the lower house, where they were initially passed by larger margins in late April before being modified in the Senate.

Marcelo García, Latin America director at political risk consultancy Horizon Engage, said in an email that this is a positive development for investors who are still adopting a wait-and-see approach with Argentina. He also mentioned that the close outcome of the Senate vote means the Milei government will need to further develop its negotiation skills.

Outside the debate on Wednesday, several people were detained and at least nine were hospitalized, including multiple members of the lower house of Congress, as reported by local media. As darkness fell, the sound of pot-banging demonstrations could be heard throughout the capital.
Earlier on Wednesday, Milei’s party made changes to the bill in order to increase its chances of success. One of the modifications was the removal of Aerolineas Argentinas, a state-run airline company, from the list of firms eligible for privatization. This controversial move had the potential to jeopardize Milei’s entire privatization plan, which also includes energy and freight firms.

With only 7 out of 72 seats in the upper chamber, Milei’s party has a minority presence. In contrast, the Peronists hold 33 seats.

The Senate vote has provided validation for Milei’s decision to appoint Guillermo Francos, an experienced politician, as his new cabinet chief. Francos will be responsible for negotiating votes and concessions in the final days leading up to the vote. This decision also marked the highest-level departure from the government since Milei assumed office on December 10th.
In a sign of improving relations, the government has transferred numerous public works projects to the provinces for them to resume, although the guarantee of funding is unclear.

The reintroduction of income taxes, which is part of a separate fiscal bill, is still awaiting approval and remains highly controversial. The omnibus bill has already been approved, allowing for privatizations and expanded executive powers, both of which are seen as crucial steps towards achieving a balanced budget and controlling triple-digit annual inflation.

The bill will now be sent back to the lower house and will include Milei’s labor reform, a significant pro-business measure aimed at making it easier for companies to terminate employees without facing costly lawsuits.

In a statement made on Wednesday, Milei expressed his satisfaction with the bill’s approval in the first round of the general vote, before the individual chapter votes took place.
According to a statement from Milei’s office, the approval of the most ambitious legislative reform in the past 40 years is seen as a triumph for the Argentine people and a crucial first step towards reclaiming their greatness.

Despite initially canceling his plans, Milei is now set to embark on an international tour to join the Group of Seven leaders in Italy this week. After returning to Argentina, he will fly out again to receive awards from libertarian organizations in Spain and Germany.