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ARGENTINA | 09-07-2024 14:16

Milei signs pact with governors signalling aid during austerity

Eighteen governors ink the 'Pacto de Mayo' with President Milei at a historic site in Tucumán Province in northern Argentina.

After securing his first legislative victory last month, President Javier Milei signed a 10-point political pact alongside most of the country’s governors just past midnight on Tuesday, the country’s Independence Day.

The 18 governors inked the May Pact, or 'Pacto de Mayo,' with the president at a historic site in Tucumán Province in northern Argentina. The symbolic document lays out 10 agreements on medium and long-term policies, and served as an olive branch that Milei first extended during his inaugural speech to Congress in March as a sign of political compromise. 

Milei titled the pact that way because he originally proposed signing it on May 25, another national holiday. It was punted until after he scored approval for his omnibus bill in Congress in late June.

In theory, the pact would offer fiscal relief to the governors in thanks for supporting his flagship legislation. To that end, the pact pledges to reopen a dialogue with the provinces on the distribution of tax revenues, a historic point of tension between the federal and local governments. The pact also includes the promise of unwavering fiscal balance, the opening of international trade, and a revamping of the country’s labor, tax and pension laws — all cornerstones of Milei’s administration.

Since taking office, Milei has significantly cut discretionary transfers to provinces often used to pay for infrastructure projects and wages, sparking protests in some provinces. Argentina’s governors — who control many members of congress of their same political stripe — had a heavy hand in negotiating Milei’s omnibus bill, which passed on June 28. The reintroduction of income taxes was a priority for those governors, who sought to regain lost revenues.

by Manuela Tobias, Bloomberg

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