Molotov cocktails and circumstantial majorities

President Javier Milei’s administration managed a decisive legislative victory in the Senate this week with the approval of his labour reform, always a thorny issue in the country of Juan Domingo Perón. 

While the ins and outs of the passage of the bill were quite interesting, in a feat ultimately capitalised by the newly minted senator, former security minister Patricia Bullrich, what happened in the streets outside the Senate building was a bit more bizarre and also responds to the “new way” in which politics is being played out. Violence and confrontations between protesters and police were captured by live television in a transmission that lasted multiple hours, not only attracting large audiences but also generating hundreds if not thousands of short clips that later went viral on social media. Politics as a spectacle, but turbo-charged on steroids, given the attention-manipulating algorithms of the digital world.

As senators debated the details for hours, streets that were initially relatively calm were turned into a battlefield. The number of protesters was relatively small, but the level of violence that was documented by TV cameras and drones was elevated. After the main columns of the far-left parties that mobilised to the Plaza de los Dos Congresos in downtown Buenos Aires had retreated, small groups of organised vandals took centre-stage. A small “unit” wearing helmets, gas masks and face-masks covering their faces used cardboard to set up a small Molotov cocktail assembly line close to the front lines of police defence. As they put together homemade explosives, in plain sight of hundreds of policemen that stood by, an armoured water cannon truck timidly aimed their way, but always missed. Once the improvised device was ready, it landed just behind police lines, fortunately not lighting up any individual police officer. The group quickly retreated, while another protester used a hammer to rip blocks off the sidewalk to throw and attack the police. Another one lowered his pants and stood naked in front of the police. A feast for the hundreds of cameras clicking and filming in situ.

Perfil’s photographers and journalists, who have years of experience at such events, were on the scene. They reported the security forces’ behaviour as odd – particularly given their passiveness during the early moments of the protests, and the escalation of their own level of aggression a few hours later, when apparently non-organised groups of individuals were beginning to fill the plaza. “They were hunting for perpetrators,” one of Perfil’s reporters explained, deciding specifically who to pin the blame on for the protests. Some suggested some of the vandals were undercover agents, either from the SIDE spy agency or the City Police Department in charge of the security operation. Others indicated radicalised members of the far-left parties went rogue, seeking to take matters into their own hands, then allowed to do their deeds by security forces in order to catch them red-handed. 

Whoever decided to scale up the violence, and for whatever reason, the Milei administration got the footage it needed to try and present their government and the labour reform as a necessary step in leaving behind Argentina’s retrograde recent past, marked by pickets, street protests, and poverty. Many watching government-friendly TV channels subscribed to the theory, while those on the opposite side of the political spectrum saw conspiracy theories. Chaos which gives each audience exactly what it needs to believe and confirm its own biases.

Within the walls of the Senate, Bullrich secured victory with a substantial majority that blows wind into the government’s sails. After having passed its 2026 Budget, the first during Javier Milei’s tenure, the libertarians latched on another legislative victory with the support of circumstantial allies including Mauricio Macri’s PRO, an important number of UCR Radicals, provincial governors and centrist Peronists. Once again, Milei’s political arm managed to amass votes through negotiations and concessions. Not only did Bullrich celebrate, but also Interior Ministry Diego ‘the Ginger’ Santilli, Cabinet Chief Manuel Adorni, ‘Lule’ Menem and Martín Menem and Presidential Chief-of-Staff Sister Karina Milei. From their lofty balcony perch, the group stared disdainfully at Vice-President Victoria Villaruel, Milei’s once-ally now banished from the libertarian Eden for her ambition. The arts of politics the President despises has once again given his government political momentum, as it did during its first year. Once again, they have a chance to keep the ball rolling, but the secret is to keep the president’s mouth (relatively) shut in order not to pick a fight with its allies.

The labour reform is an important part of the trifecta of structural reforms Milei and Economy Minister Luis ‘Toto’ Caputo agreed with the International Monetary Fund, but also the least urgent. The IMF is waiting on the libertarians to get behind pension and tax reforms which would really have an impact on the sustainability of Milei’s economic programme. Still, the labour reform includes a loosening of collective bargaining rules and a lowering of fees associated to severance and redundancy payments, together with other measures that the government hopes will incentivise the creation of private-sector jobs.

While the market initially rallied on the news, it isn’t clear whether the labour reform package will generate strong enough incentives to spur new jobs. Particularly in a context of severe contraction for the multiple labour-intensive sectors of the economy, the most important of which is the industrial sector. The Milei administration has already explained it doesn’t believe in industrial policy as it considers it contrary to the free market and it has been picking fights with the sector since its early days in office, when the President lectured industry businessmen asking them to become competitive without the help of the state, while applauding the agricultural sector. 

The President’s attacks against Paolo Rocca, the billionaire businessman that runs Techint and is the country’s largest employer, go in line with the ideological conception of a totally open economy in order to allow Adam Smith’s invisible hand to do its work. With a world that is increasingly appealing to protectionism, led by Donald Trump’s United States – with which Argentina signed a free-trade agreement that has several controversial clauses – it is difficult to imagine how the Argentine industrial sector can truly compete with the world. One of the main causes is the elevated tax burden, together with labour costs, which could be reduced by the reform. The UIA industry group representing the industrial sector, led by Martín Rapallini but always closely controlled by Techint, is asking the Milei administration to lower costs in order to “balance the playing field.” It is difficult to imagine their pleas will be heard.

Whether it’s through industrial policy or genuine economic growth that sparks service-sector jobs (as Milei has indicated during the campaign), the Argentine economy is facing a crunch given salaries falling behind inflation, stagnation of private-sector job supply and a consistently growing informal sector. Going back to those violent protests outside Congress, many have been predicting the collapse of the Milei administration, especially hardliners in the opposition closer to Kirchnerism. That seems unlikely, but it is fair to question the level of social tolerance to the economic crunch a large number of Argentines are experiencing. While inflation has come down, it remains high, even if Milei and Caputo oversaw the departure of the head of the INDEC national statistics bureau, Marco Lavagna, who was set on updating the methodology behind Argentina’s consumer price index. There is a real question as to how the government’s economic policy path will generate greater welfare for a majority of the population.

There are potential comparisons with the 2001 flare-ups that ended Fernándo De La Rúa’s government and set Argentina off on a deep socio-economic-political crisis. Or the 2017 protests outside Congress when Macri, freshly off a decisive victory in midterm elections, passed a pension reform that a large portion of society saw as unfair against retirees. Things seem different this time around. Milei validated his social mandate in last year’s midterms and has now effectively used his newly gained legislative muscle to pass key legislation. Opinion polls indicate Milei maintains high approval ratings and an important portion of the population agrees with the need to embark on structural reforms. Political analyst Manuel Zunino explained in an interview with Modo Fontevecchia that the main attributes behind support for Milei are the perception of his determination and hope for the future. Even in the face of persistent corruption scandals, from the ANDIS national disability agency to the ‘$LIBRA’ crypto-scandal and beyond.

If at any point, Milei is no longer seen by a majority as a reason to be hopeful for the future, the situation on the streets could quickly turn and what were a few pockets of violence on Wednesday could spread into something nastier. For the time being, the Casa Rosada can continue to dream about hegemony, but at some point they better wake up and get the economy going.