Monday, July 15, 2024

ARGENTINA | 21-06-2024 06:12

Congress win puts pressure on Milei to deliver on economic promises

Javier Milei’s win in Congress has started the clock ticking. Argentina’s president needs achievements to convince a society that is impatient for economic change that better times are around the corner.

President Javier Milei has achieved his first legislative breakthrough after six months in power with the approval of what he describes as the “most ambitious reform in the last 40 years.”  But now, in the midst of an apparent good run, he must deal with a society that is impatient for economic results.

Milei’s so-called ‘Ley de Bases’ bill just scraped through the Senate after a marathon session, and it has yet to be definitively signed off by the Chamber of Deputies. Still, it’s progress: in January, a version of the same law with some 600 articles, as against the current one with just over 200, had failed in the lower house and been withdrawn.

The negotiated and trimmed reform bill includes the privatisation of some state-run companies, tax changes, economic deregulation, the delegation of special powers to the Executive branch and a special regime for large overseas investors.

“It’s the most important milestone since Milei became president," said political analyst Gustavo Córdoba. “He found a virtuous circle to build power which proved successful.”

This shows that the outspoken head of state, who has insulted Congress and its members by calling them a “rat’s nest,” or responded to their decisions by saying that he doesn’t give “a damn” about them, is starting to “delegate to politics specialists in negotiation,” Córdoba explained.

In line with this, historian and political analyst Rosendo Fraga stated that “the government has moved away from ‘all or nothing,’ and that explains why it will accept a law that falls short of the goals.”

Córdoba stressed that, after the legislative victory, “mileísmo was born.” The government did “everything it had to do to pass the law.”

On the other side, the opposition is fragmented and rather heterogeneous. 

“The opposition was not as up to the challenge of building power as the government was, and it attended the session in an improvised way,” Córdoba highlighted.

The Senate vote took place in a context of heavy recession with industrial activity and consumption collapsed. Half of the population lives in poverty, thousands of state workers have been laid off and salaries and pensions have lost purchasing power in the face of high inflation.

The government can boast achievements on that front: inflation continued to slow down in May to a monthly 4.2 percent, the lowest figure in two-and-a-half years, though over the last 12 months it remains near 280 percent; meanwhile, public spending is being brought under control. 

Last Thursday, the International Monetary Fund gave Milei another boost when it approved the eighth quarterly review of Argentina's US$44-billion credit agreement and the immediate disbursement of some US$800 million. 

But the IMF also called on Milei’s government to "improve the quality of fiscal adjustment.” 

Society too is growing impatient. The Senate debate was accompanied by protests and clashes with security forces outside Congress. Dozens of people were wounded and arrested, while two cars were set on fire.

Milei has repeatedly asserted that his reform bill is key for the country’s economic take-off. With its approval, that discursive tool has vanished.

“People will say, ‘OK, you already have the tools you need,’ so the time it takes to show results will work against him," Córdoba pointed out. 

According to several surveys, Milei still retains around 50 percent approval among the population.

In political scientist Iván Schuliaquer’s opinion, “what a lot of people still associate with Milei is hope, the possibility of a future where that promise that after the adjustment there is growth is kept, which a lot of players call into question.”

In other words, the government now has less time to bring about economic change. 

Back in May, Presidential Spokesperson Manuel Adorni said that the ‘Ley de Bases’ bill’s RIGI (Regime of Incentive for Big Investment) investment scheme would mean “more jobs, more companies paying taxes in Argentina, [and] the development of an entire production chain.”

The controversial incentive scheme offers fiscal, customs and foreign exchange advantages lasting 30 years for foreign capital investors who put in more than US$200 million.

The results of the RIGI scheme will not be immediate, experts warn. Critics, meanwhile, accuse the government of intending to give a blank cheque to foreign capitals.



by Martín Raschinsky, AFP


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