On Wednesday, the Argentine Senate approved two bills in President Javier Milei’s economic reform plan, marking a significant step forward for the right-wing libertarian leader in fulfilling his reform commitments.
According to reports from the Associated Press, after 11 hours of intense debate, senators passed the reform legislation with a vote of 37 in favor and 36 against.
Senate President and Vice President Victoria Villarruel cast the decisive vote in support of Milei’s agenda, reflecting a deep divide and opposition within the Argentine Congress.
The approved bills include a proposal to lower the income tax threshold and a state reform bill with 238 provisions, originally part of an omnibus bill that initially contained over 600 articles.
The current scaled-down version still grants President Milei broad legislative powers in areas such as energy, pensions, security, and others, with measures to incentivize investment, deregulate the economy, and reduce deficits. Milei plans to privatize some of Argentina’s state-owned enterprises. One controversial provision is a tax exemption program for foreign investors for up to 30 years, alongside tariff exemptions on machinery imports and other incentives for large corporations, criticized for allegedly neglecting local industries. Opposition to the tax bill focuses on an amnesty measure allowing Argentines to declare previously undeclared assets both domestically and abroad without facing substantial taxes.
In late April, these two bills passed the House of Representatives after weeks of debate and revisions. If the Senate makes amendments, the bills will need to return to the House for another vote before Milei can secure his first legislative victory since taking office in December last year.
Given the wide-reaching implications of the legislation and strong opposition, legislative progress has been slow. Some protesters fear further unemployment and price hikes as a result.
The proposal has faced strong resistance from the left-wing Peronist alliance led by former Vice President Cristina Kirchner.
The Peronist party controls 33 out of 72 seats in the Senate, while Milei’s La Libertad Avanza (LLA) party holds only 7 seats, and he has been working to reach agreements with the opposition.
During the heated debate over the bills, protesters in downtown Buenos Aires threw sticks, stones, and homemade firebombs at police, overturning at least two vehicles. Police responded by using pepper spray, water cannons, and tear gas to disperse the crowds.
Dozens of demonstrators received medical treatment on the streets, with police reporting 20 officers injured in the clashes. At least five Peronist party members claimed they were hospitalized after being sprayed with pepper spray by police.
Over the past month, as political tensions have escalated, uncertainty has loomed over the country’s economic situation. Sovereign bonds have plummeted, the Argentine peso has depreciated, and the gap between the official and black market exchange rates has widened to nearly 40%. On Wednesday, the peso was trading at 1,255 pesos to the US dollar in the informal market, significantly lower than earlier this year.
Analysts note that foreign investors and international financial institutions (Argentina owes up to $440 billion in debt) have closely watched the outcome of Wednesday’s vote. This vote is seen as a severe test of Milei’s political ideology and governance capabilities.
While the International Monetary Fund (IMF) has praised the agenda of the libertarian president and released multiple frozen loans, progress has been slow in providing Argentina with new cash. Milei has stated he needs this cash to lift currency controls.
As a right-wing economist, Milei campaigned for the presidency promising to address Argentina’s most severe economic crisis in two decades. His proposed economic reform bills aim to improve the country’s economic situation by encouraging free trade, private sector investment to create new job opportunities, and reduce poverty in Argentina.
Since taking office, Milei has issued a series of emergency decrees to implement his “chainsaw reform,” including significant cuts in government employees, reducing public spending and budget deficits, and lowering transportation and fuel subsidies, among others. In January 2024, the Argentine government achieved its first monthly fiscal surplus in nearly 12 years. However, the new administration still faces numerous challenges, such as high poverty rates and inflation.