Monday, July 15, 2024

ECONOMY | 12-06-2024 14:38

Milei’s signature reforms at risk in tense Senate vote

President Javier Milei is pushing to get his signature omnibus reform package across the finish line in the Senate.

President Javier Milei is pushing to get his signature omnibus reform package across the finish line in the Senate in a debate that began Wednesday morning, although its most important fiscal measures face strong opposition and hang by a thread.

Weeks of tense negotiations likely have the reform plan headed to approval in a general vote. The real challenge, however, will follow, when senators have to ratify each measure of the bill and its accompanying fiscal package in a chapter-by-chapter vote. 

Milei’s party already modified the bill to heighten its chances by removing the state-run airline company Aerolíneas Argentinas, among others, from the list of firms eligible for privatisation. The controversial bid previously put at risk his entire privatisation chapter, which also includes energy and freight firms.

If both bills are approved in whole with amendments, they’ll head back to the slightly friendlier lower house for lawmakers to either accept the changes or try to reverse them before going into effect. 

Milei’s party holds just seven of 72 seats in the upper chamber. Meanwhile, the Peronists have 33 senators, meaning they only need four more votes to reject the measures they oppose with a simple majority. The parts of the reform package facing the strongest opposition are the reintroduction of income taxes, privatisations, and expanded executive powers to, say, eliminate energy subsidies — all crucial ingredients to achieving a balanced budget and taming triple-digit annual inflation.

“The contest is very tight, and the government’s negotiation skills will be tested in just a few hours,” Latin Securities research analyst Pedro Maulhardt said Wednesday in a report.

A change made by simple majority can be reversed in the lower house, where the omnibus bill won approval in late April, whereas a two-thirds vote — which the opposition has been vying to achieve for the more controversial measures — would be nearly impossible to reverse. Milei holds 15 percent of seats in the lower house and counts on more allies there. But voting to reintroduce income taxes a second time, amid falling real wages and rising joblessness, may prove difficult.

Wednesday stands to test Milei’s sharpening negotiating skills. Governors paraded through the presidential palace in the weeks leading up to the vote to meet with Guillermo Francos, the president’s newly minted Cabinet chief. 

In a show of thawing tensions, the government handed hundreds of previously halted public works projects over to the provinces so they could restart them, although funding assurances are less clear. On Tuesday evening, a document circulated among journalists announcing that a senator from a moderate bloc, Juntos por el Cambio, had been named ambassador to UNESCO in Paris, prompting accusations of horse trading.


Investment incentives

Even if senators vote down key chapters, the 200-plus-article reform bill would likely still contain incentives for foreign investors in large projects like mining, known as RIGI, and major reforms to the country’s labour laws to make it easier to fire workers without being subjected to multimillion dollar lawsuits.

Speaking at an economic and finance event in Buenos Aires on Wednesday morning just as the senate debate took off, Milei blamed Congress for forcing more pain on Argentines through austerity by taking so long to vote on these reforms, which he first introduced in December. He assured the crowd that his commitment to a balanced budget is unwavering.

“They will have to drag me dead from the presidential palace to break the fiscal target,” he said.

Milei is slated to depart on another international tour Wednesday night to join Group of Seven leaders in Italy, a trip he initially cancelled and later reconfirmed. He’ll return to Argentina next week before flying out again to receive awards from libertarian organizations in Spain and Germany.

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by Manuela Tobias, Bloomberg

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