Milei’s calculated risks

After months of fierce confrontation, President Javier Milei appealed to the pragmatist within him and managed to get his ‘Ley de Bases’ bill passed in the lower house Chamber of Deputies, securing the support of Mauricio Macri’s PRO party, select members of the Unión Cívica Radical (UCR), Miguel Ángel Pichetto’s centrist Hacemos por Nuestra País caucus and provincial governors, including some Peronists.

It’s not the first time the anarcho-capitalist has decided to play ball and look for support beyond the tight borders of his La Libertad Avanza coalition and so it shouldn’t be read purely as a strategic change – rather it is more like a tactical manoeuvre. Securing a first legislative victory was an absolute necessity for the Milei administration four months into its term, particularly when it inflicted self-harm by pulling the previous version after arduous negotiations lasting several weeks, giving credence to the idea that it was incapable and unwilling to secure governability.

With the Senate as their next obstacle, the Milei duo (i.e. Javier and Karina, a.k.a. “the boss”) will rely on an internal adversary, Vice-President Victoria Villaruel, and provincial governors who they brought on board for the legislative process, probably in exchange for some sort of funding. After having felt the “punch” of the recent protest in defence of the public university system, the ultra-libertarian economist has become a little bit less fundamentalist in his quest for a budget surplus, kicking out rate hikes and freeing certain funding. Whether this be enough to maintain levels of support and avert some sort of uprising, social or political, will probably be tied to society’s capacity to absorb Milei’s momentous austerity plan.

The President unveiled a strategy of negotiation punctuated by intense conflict with his political adversaries in the early stages of his Presidency. He met outgoing head of state Alberto Fernández and started to build a cabinet and team for governance that seemed reasonable at first. But then he shocked the political ecosystem by unveiling the one-two punch of the so-called ‘omnibus’ bill and his DNU emergency mega-decree. Milei then sent Interior Minister Guillermo Francos to negotiate with different factions across the political ecosystem, securing the support of several groups of deputies, only to pull the bill after having gotten lawmakers to work through their vacation period, pulling the rug from under their feet. UCR caucus chief Rodrigo De Loredo even broke down into tears while speaking to the press at the time.

This time around, Milei finally put together a “coalition of the willing,” of sorts, in order to pass a marquee piece of legislation that will supposedly give his administration important tools to move forward with its economic and political plan. It’s important to try to understand the make-up of Milei’s support in Congress. With 142 votes in favour and 106 against (and five abstentions), meaning he secured 56 percent of the potential votes in the lower house – a similar figure to what got him elected in last year’s presidential run-off against Sergio Massa. He amassed his few legislators and a major portion of the former Juntos por el Cambio coalition, joining them together with certain deputies who respond to provincial governors. As expected, the pan-Peronist Unión por la Patria front opposed the bill, as did Elisa ‘Lilita’ Carrió’s Coalición Cívica, and the far-left parties.

Milei knows that despite his legislative weakness he has the capacity to conjure the support of a winning majority if he concedes ground, and he knows he has the tools – namely Francos and control of the budget – to achieve that. Assuming the same level of pragmatism in the Senate, and the same level of support from Villaruel that they received from the well-disposed Lower House Speaker Martín Menem, the national administration could finally secure a full legislative victory, setting the ground for the implementation of their plan.

Yet, the plan is by no means secure. Not only could they lose in the Senate, but the other portion of the bureaucratic framework, the DNU emergency decree, could fall in Congress too. It could also face scrutiny from the Supreme Court, which up to now has adopted a “wait and see” approach while telling the political class to take care of its own mess. The nation’s highest tribunal, led by Supreme Court Chief Justice Horacio Rosatti, has shown in the past that it is willing to play hard ball with politics. It blocked candidates seeking what it considered excessive re-election in provincial governorships, ruled on the issue of federal revenue-sharing funds (“coparticipación”), and going further back in time blocked utility price hikes during the Mauricio Macri administration.

Meanwhile, Milei is attempting to change the court’s make-up. His plan appears to be the construction of a “liberal court,” which should be read as a subservient court and that is why he’s proposed judges Manuel García-Mansilla and Ariel Lijo, who with the support of former Supreme Court chief justice Ricardo Lorenzetti could guarantee a majority over the aforementioned Rosatti and Carlos Rosenkratz. According to journalist Carlos Pagni, this is part of a plan devised by Lorenzetti to erode the power that Rosatti has amassed in the tribuna. Furthermore, the decision to propose Lijo is extremely controversial given ample accusations of delayed rulings and corruption, particularly those associated with his brother Alfredo ‘Freddy’ Lijo (an accusation mainly built by Pagni as of late, but which has also won the support of several legal professionals and associations).

What is clear to Milei is that his main political opponent at this moment, Cristina Fernández de Kirchner, lacked the capacity to stop his plan. This means that whatever legislative missteps La Libertad Avanza suffers are more the consequence of their inexperience or fundamentalist positions, and not of a willing group of potential allies that remains united in their distaste for Kirchnerism. It wasn’t about “synthetic power” (as derived from the digital ecosystem) this time, but rather traditional political negotiations and a pragmatic view of how to get things done from within the system. In part, this could be due to the fact that certain portions of the President’s macroeconomic plan seem to be working better than expected, starting with the budget surplus achieved in the first quarter and what appears to be a steep deceleration of inflation last month.

Do Milei and Caputo have a wider margin to release some extra funds? Can they sustain this strong peso policy in order to continue to amass foreign exchange reserves? Will they avoid a deep devaluation that would quickly feed into inflation and accelerate the already intense effects of the deliberate recession? As I’ve said before, the real world effects of Milei’s economic plan are painful, with poverty and unemployment increasing, companies closing and basic necessities becoming extremely costly. For now, people are resisting, but they will not tolerate certain situations such as an efficient attack on the state university system, which represents one of the few elements of social mobility left.