Tuesday, July 16, 2024

ARGENTINA | 28-06-2024 09:31

Milei celebrates as Congress signs off on ‘Ley de Bases’ reform package

Milei secures first legislative victory since taking office more than six months ago; Lawmakers in lower house back revised 'Ley de Bases' package with 147 votes in favour, 107 against and 2 abstentions. Bids to privatise Aerolíneas Argentinas, Correo Argentino and state media outlets left off bill, though income tax will be reinstated.

President Javier Milei has scored his first real legislative triumph in Congress after lawmakers in the lower house voted to back a slimmed-down version of his sweeping economic reform plan.

After an hours-long debate the Chamber of Deputies approved the bill as well as an accompanying fiscal package, which includes the reinstatement of income tax on salaries. 

Milei's party is in the minority in both houses of Congress, which he has described as a "nest of rats," making legislative approval a major hurdle for his government. 

In a statement, the President’s Office said it "celebrates" the approval of the bill, granted after a 14-hour debate late Thursday night.

The libertarian administration thanked the "38 deputies, seven senators and a sector of the political leadership" that had chosen to back the bill despite the "obstructionism of Kirchnerism and its usual accomplices."

"The Executive branch is once again grateful for the patriotic work of the legislators who understood the historic responsibility they had in their hands and contributed their affirmative vote, despite the constant and desperate attempts of those who want to cling to their privileges at the expense of the country's development," read the statement. continued.

In addition to the ruling caucuses, lawmakers from PRO, the Unión Cívica Radical (UCR), a large part of Hacemos Coalición Federal, Innovación Federal, the Coalición Cívica and other minority forces backed the bill.

The Unión por la Patria, Frente de Izquierda caucuses and the socialist deputies of Santa Fe voted against.

Milei began congratulating himself even before the package was adopted, hailing it as "the greatest fiscal adjustment not only in Argentina history, but in the history of humanity.”

The 53-year-old economist and self-declared "anarcho-capitalist" now has the green light to declare a one-year state of economic emergency, disband federal agencies, and privatise a number of public companies.

The declaration of an emergency will see him given additional legislative powers.

Other measures deal with weakening labour protections – slammed by left-wing opponents as a licence to fire workers.

The provisions also envision tax, customs and foreign exchange incentives to encourage investment in the country wracked by economic crisis. Foreign firms investing more than US$200 million over 30 years will receive benefits.

Preliminary approval for the bill earlier this month was marred by protests that saw police use rubber bullets, water cannon and pepper spray against the rioters, who responded by throwing stones at officers.

The bill was approved by 148 votes to 107 for the amended reform package, with two abstentions.

"We are going to give President Milei's government the tools to reform the state once and for all," ruling party caucus chief Gabriel Bornoroni said in his closing speech early Friday. 

"The national government achieved the approval of the first law towards the free and prosperous country that Argentines have chosen," the presidential communiqué states.

The new income tax floor to begin paying will now be set at 1.8 million pesos monthly – affecting some 800,000 workers.

A reduction in the personal property tax rate was also backed.


Further austerity

Milei's government has applied a drastic, all-out fiscal austerity programme, with the aim of achieving "zero budget deficit" by the end of 2024 to tame chronic inflation. 

But budget cuts, including the paralysis of public works, coupled with a brutal devaluation of the peso by more than half in December, have strangled purchasing power. 

Politically, Friday's green light means "a total success for the government," political scientist and economist Pablo Tigani told AFP. 

But economically, "it will be a return to the policies of the 1990s, with deregulation, privatisation and unconditional opening of the economy, which will cause a hard blow to industry and small and medium-sized national businesses, with a phenomenal transfer of income to the most concentrated sectors of the economy," he added.

Nevertheless, "laws don't mean much when the economic and social situation is explosive," warned Tigani.

"I see problems of governability and a president who put in checkmate by the social situation, despite having his laws," he explained.

"This is a tailor-made suit for the sectors of concentrated power in Argentina," said Peronist MP Hugo Yasky in his speech to the chamber, who considered that the law would allow foreign capital "to come and take the oil and lithium" of Argentina "in exchange for nothing."

PRO deputy Oscar Agost Carreño, a member of an opposition bloc that supported the government's initiative, said in the debate: "We are going to give the government the tools because we believe they have to resolve what they have not been able to do so far. Now the excuses are over."

"Getting the first law is of great political importance, but the government now has a new challenge because the opposition is going to begin to generate a completely different policy from that of the last six months," said analyst Carlos Germano of the consultancy firm Germano y Asociados.

This will force Milei "to prioritise management, to be much more of a president and to stop promoting the character that allowed him to get this far," he said.


Slimmed down

Originally, the 'Ley de Bases' – which Milei launched with great pomp as the foundation of his government's plans – contained more than 600 articles intended to liberalise and deregulate the economy. But after a failed vote last February, the bill was slashed to 238 articles. 

The new version was by the lower house and earlier this month, the Senate signed off too, though it also introduced amendments. 

To achieve approval, the government removed flag carrier Aerolíneas Argentinas, the Correo Argentino post office, and Radio y Television Argentina (RTA), which controls public TV and national radio, from the list of companies to be privatised. 

The government also dropped a pension reform that would have eliminated a moratorium benefitting people who cannot prove 30 years of contribution upon reaching retirement age, vital in a country where nearly half the workforce is employed in the informal sector. 

The area around the National Congress building was fenced off on Thursday morning in advance of anticipated protests, which were relatively subdued.

President Milei will now have to sign the law for it to enter into force, but can also veto it in whole or in part.




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