June 22, 2024
BUENOS AIRES, Argentina (AP) — Argentina's Senate narrowly approved President Javier Milei ’s sweeping proposals to slash state spending and boost his own powers on Thursday, handing the libertarian leader a much-needed first legislative victory even as opposition senators scrapped an income tax package and tweaked some contentious parts of the plan.
Senate president Victoria Villarruel, the vice president, used a tie-breaking vote to give provisional approval to two bills after a daylong heated debate while thousands of protesters poured into the streets, burning cars and throwing Molotov cocktails. Hundreds of federal security forces pushed back with tear gas and water cannons.
In a marathon article-by-article voting session that stretched into Thursday morning, the Senate advanced the most critical parts of Milei's plans to trim the fiscal deficit, incentivize foreign investment and privatize some state companies in a bid to overhaul Argentina's long-troubled economy.
The state reform bill needs to pass a further reading in the lower house in the coming weeks before it becomes law. It is highly likely that the lower house will approve the changes.
It marked a major boost to Milei, whose radical efforts to overhaul the government and economy have run into tough resistance in Argentina’s opposition-dominated Congress.
“Tonight is a triumph for the Argentine people and the first step toward the recovery of our greatness," Milei posted on X, calling his bills “the most ambitious legislative reform of the last 40 years.”
Lawmakers have clashed over various parts of the 238-article state reform bill, including the declaration of a one-year state of emergency and delegation of broad powers to the president in energy, pensions, security and other matters until the end of Milei's term in 2027. The expansion of presidential powers passed in a close vote during the article-by-article reading.
Other highly divisive measures that passed include an incentive scheme that would give investors lucrative tax breaks for 30 years.
Milei is a political outsider with just two years' experience as a lawmaker, and his 3-year-old party, Liberty Advances, holds just 15% of seats in the lower house and 10% of the Senate.
He has been unable to pass a single piece of legislation in his six months of presidency, raising questions about whether he can execute his ambitious project to trim the deficit and spur growth. Instead, he's used executive powers to slash subsidies, fire thousands of public employees, devalue the currency and deregulate parts of the Argentine economy.
The spending cuts and currency devaluation that Milei has delivered have — at least in the short term — deepened a recession, increased poverty to 55% and sent annual inflation surging toward 300%.
Analysts say the promised benefits of Milei's reforms — a stable currency, tamer inflation, fresh foreign investment — won't materialize without a political consensus to convince foreign investors that his changes are here to stay. Milei's administration has said it wants to strike a new deal with the International Monetary Fund, to which Argentina already owes $44 billion.
“Everyone is in a wait-and-see mode,” said Marcelo J. García, Americas director at geopolitical risk firm Horizon Engage. “Investors say, ’Yes, we love what you’re saying, but we need to see that this is sustainable.”
Milei's allies said they had made tough concessions Wednesday. His party, Liberty Advances, agreed not to sell off the country's post office, flagship airline Aerolíneas Argentinas, or the public radio service, leaving just a handful of state-owned firms, including Argentina's nuclear power company, on the block for possible privatization.
