Argentina: Senate passes key reforms as test for President Milei’s radical agenda

BUENOS AIRES, Argentina (AP) — Argentina’s Senate has narrowly approved key state and tax reform bills proposed by President Javier Miliei, marking the first victory for the libertarian politician in his effort to turn his promises of radical change into reality.

Senators approved the reform bill by a vote of 37 to 36 late Wednesday night, after 11 hours of heated debate amid clashes between protesters and police outside Congress, urging lawmakers to reject Milei’s tough austerity plan. Senators still have to approve individual measures in an article-by-article vote that is expected to drag on through the night.

Reflecting the fierce backlash against the law and the deep polarization currently prevailing in the Argentine Congress, Vice President and President of the Senate Victoria Villarruel cast the deciding vote for Milei’s agenda.

The law gives the president sweeping powers over energy, pensions, security and other areas and includes several controversial measures, including a generous incentive system for foreign investors, a tax amnesty for those with undeclared assets and plans to privatize some of Argentina’s state-owned companies.

If the Senate approves the articles with amendments, the lower house will still have to approve them before Milei can declare his first victory in parliament since taking office last December.

As senators went through the bills, protesters in downtown Buenos Aires threw sticks, stones and Molotov cocktails at police, who used water cannon, pepper spray and tear gas to disperse the huge crowd. Protesters doused two cars with gasoline and set them on fire, turning the central square into a smoke-filled battlefield. Authorities reported at least 20 police officers injured and more than a dozen protesters arrested.

Milei came to power promising to solve Argentina’s worst economic crisis in two decades. But his party, made up of relative newcomers, has only a tiny minority of seats in Congress and he has struggled to reach agreements with the opposition.

“We have the weakest president we’ve ever seen trying to push through the biggest bill we’ve ever seen,” said Ana Iparraguirre, an Argentina-based analyst at the Washington strategy firm GBAO. “That’s the contradiction.”

Senators passed two bills late Wednesday, a tax package and a 238-article government reform bill. the lower house of Congress End of April. Months of negotiations watered down the original, far-reaching proposal, which included over 600 articles.

Unlike previous Argentine politicians since the return to democracy in 1983, Milei has failed to pass a single law in his first six months in office. Instead, the populist outsider has relied on his executive powers to drastically cut government spending and lift economic restrictions.

“Today, it is almost more important for Milei to show that he can pass laws in Congress than what laws he passes,” said Lucas Romero, director of the consulting firm Synopsis.

This desperation was evident in the closing arguments of some senators.

“How can I not give a president a tool he needs to function?” said Luis Juez, a senator with the right-wing PRO party, a loose ally of Milei. “We voted to make sure this doesn’t fail, because if things go bad for Milei, things go bad for everyone.”

Milei’s bill faced the fiercest opposition from the left-wing Peronist movement around former President Cristina Fernández de Kirchner, who has dominated Argentine politics for the past two decades and wields great influence over the country’s powerful unions.

Throughout the day, bankers, teachers, truck drivers and thousands of workers from other unions gathered around the convention center, beating drums, blowing trumpets and chanting, “Our country is not for sale!” and “We will defend this state!”

“If this law is passed, we will lose many of our labor and pension rights,” said 54-year-old teacher Miriam Rajovitcher, who protested ahead of the vote alongside her fellow Argentine middle-class colleagues. They say they have had to reorganize their lives since Milei cut school budgets and devalued the currency, causing inflation to rise to 300 percent. “I’m so much worse off.”

The presidential office condemned the demonstrators as “terrorists” and accused them of “attempting a coup” by disrupting the congressional session.

The Peronist bloc controls 33 of 72 seats in the Senate, while Milei’s Freedom Advances party holds only seven seats. The bill needed 37 votes from the 72 Senate members to gain a majority and ended in a 36-36 tie.

Analysts say foreign investors and the International Monetary Fund, to which Argentina owes a whopping $44 billion, were closely watching Wednesday’s vote to see if Milei could reach a consensus with his opponents.

“Everyone is waiting. Investors are saying, ‘Yes, we like what you’re saying, but we need to see that this is sustainable,'” said Marcelo J. García, Americas director at Horizon Engage, a geopolitical risk firm.

The article-by-article vote on Wednesday will drag on for hours, with analysts expecting lawmakers to further weaken the most controversial sections of the bill.

One of the most controversial measures is an incentive program that offers foreign investors lucrative tax breaks for 30 years, no import duties on machinery and other benefits for large corporations. Critics say this neglects local industry too much.

“What this law hits most are the wallets of the workers, not those of the big companies, which will only get richer because of it,” says 36-year-old Juan Barreto, a bank employee who is jostling among the crowd of his union colleagues.

Argentine unions have also expressed strong opposition to measures that would make it easier for companies to lay off employees, as well as plans to privatize some state-owned companies.

Opposition to the tax law has focused in particular on an amnesty that would allow Argentines to declare undeclared assets at home and abroad without paying high taxes, and on lowering the income tax threshold to force more workers to pay taxes.

Frustrated by legislative resistance, Milei has increasingly softened his previous all-or-nothing approach. Earlier this month, in an attempt to break the impasse, he fired his inexperienced cabinet chief and replaced him with Interior Minister Guillermo Francos, a career politician experienced in haggling in Congress.

Political tensions have increased over the past month, raising doubts about Milei’s governability and bringing uncertainty to the Argentine economy.

Government bonds have plummeted. The national currency, the peso, has also lost value, widening the gap between the official exchange rate and the black market rate to almost 40 percent. On Wednesday, the peso was trading on the informal market at $1,255 per dollar, a significantly lower rate than at the beginning of the year.

Although the IMF praised the libertarian’s agenda and released tranches of frozen loans, the fund held off on disbursing fresh money to Argentina, which Milei said was needed to lift currency controls.

In the meantime, Milei has met with billionaire tech executives Elon Musk, Tim Cook and Mark Zuckerberg in Silicon Valley. However, no announcements of major investments were made at the meetings.

“What you’ve seen in the last three weeks is that the market and investors are getting a little nervous,” García said. “The market is saying, ‘Show me you can govern.'”