Peronist governors will support the 2019 Budget through the Senate if the Mauricio Macri government backtracks on the elimination of the so-called Soy Fund, which provincial and local governments have historically used to fund public works projects.
In response to the tension, the government on Tuesday released one billion pesos (US$270 million) in compensation for provinces and municipalities.
Peronist governors are known to yield significant control over national senators representing their respective provinces. Their decision, yet to be confirmed publicly, is a blow to the government, which thought the Budget was all but set for passage though the Senate.
The conditions set down by governors in exchange for their support the 2019 Budget bill were expressed to Peronist majority leader Senator Miguel Pichetto during a meeting Tuesday. Pichetto's congressional bloc last week supported the Budget through committee level and the Lower House, amid violent clashes between police and protesters outside Congress.
The Senate will vote on the Budget on November 14, just days before Buenos Aires shuts down for the G20 Leaders Summit, where authorities are also expecting protests. The government needs an additional 12 senate votes to secure its 2019 economic plans.
During the meeting Tuesday, Santiago del Estero governor Gerardo Zamora and his Formosa counterpart Gildo Insfrán were the most vocal about the Soy Fund's future, the Noticias Argentinas news agency reported.
Tierra del Fuego, Chubut and Catamarca provinces have started legal action against the government over the issue, having rejected the 4.12 billion peso compensation package the Macri administration promised for this year.