Milei's Economic Reform Bill Advances in Argentine Congress

In a significant step forward for President Javier Milei's ambitious economic agenda, Argentina'slower houseof Congress approved a sweeping reform bill on Tuesday. The package, which includes articles related to privatizing state bodies and labor reform, now heads to the Senate for a final vote.

The approval of the bill, commonly referred to as the omnibus law, boosted markets, with the S&P Merval stock index rising nearly 2% and bonds gaining 0.6%. Milei's party only has a minority in Congress, but he has won support from allies in the lower house after months of negotiations and concessions. However, the reform package is expected to face stronger opposition in the Senate.

Why this matters: The passage of this economic reform bill has significant implications for Argentina's economy and its people, as it aims to tackle the country's high inflation rate and revamp its economic structure. The success or failure of this bill could have far-reaching consequences for Argentina's economic stability and its ability to attract foreign investment.

The omnibus law aims to rev up Argentina's embattled economy and tamp down inflation, which is nearing 300%. Milei hopes to achieve a "zero deficit" this year through painful austerity measures. The bill grants Milei a year of "public emergency" authority to make sweeping changes to the country's legal structure and allows for the privatization of almost a dozen state-owned companies, including Aerolineas Argentinas and Agua y Saneamientos.

The package also introduces new labor laws, including extended trial periods for new hires and reduced penalties for employing unregistered workers. It establishes a "severance fund" to replace the existing severance pay system and revises retirement benefits. Lawmakers also voted to approve a separate fiscal package that would cut tax rates on personal assets but raise taxes on high-income earners.

Reacting to the bill's approval, President Milei tweeted, "This is a fundamental first step to get Argentina out of the quagmire that it has been in over the last few decades." Conservative lower house lawmaker Victoria Borrego added, "This support will allow Milei to govern."

However, the opposition criticized the reform package. Peronist opposition member Santiago Cafiero argued, "Voting for this law is legitimising a project that does not solve the problems of Argentines, neither poverty nor inflation." Governor of Buenos Aires Axel Kicillof described the day as a "disastrous day" for Argentina and called on the Senate to reject the law, stating that it "institutionalizes the desertion of the National State from its most elementary obligations, that enshrines privileges, damages rights, resigns sovereignty and deepens inequality."

The Argentine government seeks to debate the Law Bases and fiscal package in the Senate on May 16, 2024. Despite the momentum from the lower house approval, Milei is expected to face a bigger challenge in the Senate, where his party, La Libertad Avanza, holds only seven of the 72 seats. The opposition is expected to continue its resistance to the law in the upper chamber.

Key Takeaways

• Argentina's lower house approves President Milei's economic reform bill.
• Bill aims to tackle high inflation (nearing 300%) and revamp economy.
• Reform package includes privatization of state bodies and labor reform.
• Bill faces stronger opposition in Senate, where Milei's party holds 7/72 seats.
• Success or failure of bill has significant implications for Argentina's economy.