Lower House approves budget

President Mauricio Macri’s ambitious reform agenda, the basis of his campaign promises, moved several steps forward this week with the passage of the controversial pension reform package, tax reform, and a series of other laws including a fiscal compact that promises to shift more funds to provincial coffers.

Lawmakers in the Lower House also approved the 2018 Budget proposal yesterday, sending it to the Senate. After the verbal and physical violence that erupted in the context of the pension reform, Macri’s ruling Cambiemos (Let’s Change) coalition managed to capitalise on the positive momentum, with its similarly divisive labour reform now booted to March.

BUDGET AND FISCAL PACT

As a challenging year comes to a close, Cambiemos can now point to macroeconomic indicators that will show positive economic growth and falling inflation. That’s what’s anticipated in 2018, according to the approved budget which passed with 165 votes in favour against 64 objections.

Counting with the support of deputies responding to Martin Lousteau and Sergio Massa’s Frente Renovador, the draft – which goes to the Senate next week – puts gross domestic product estimates at 3.5 percent growth, inflation at 15.7 percent, and a mean value of the dollar at 19.30 pesos. The government expects to cut the fiscal deficit from 4.5 to 3.2 percent by the end of the year, while private consumption should jump 3.3 percent and investment is expected to climb to between 12 and 17.1 percent of GDP. Deputies responding to Cristina Fernández de Kirchner, along with leftist parties and San Luis Peronists responding to Adolfo Rodríguez Saá voted against the measure.

Undeterred by the hitches accompanying the approval of pension reform, the government is pressing full speed ahead with its tax legislation, seeking its final parliamentary passage within what remains of this year. The tax package has undergone constant chopping and changing, which continued right up to its Lower House approval by a 146-77 vote on Wednesday. The latest innovations include a new 35-percent levy on executive severance packages, the removal of excise on soft drinks (to appease the deputies of sugar-producing Tucumán) and the reduction of the excise on beer to 14 percent. At the same time the Senate approved the tax package in committee and it now passes to a floor vote after Christmas.