Tuesday, July 16, 2024

ARGENTINA | 08-07-2024 13:32

Milei's key reforms, 'Ley de Bases' and fiscal package, become law in Argentina

Day before signing of his ‘Pacto de Mayo’ in Tucumán, President Milei’s government promulgates ‘Ley de Bases’ omnibus bill and accompanying fiscal package into law.

President Javier Milei's flagship economic reforms kicked in on Monday as his government formally promulgated the ‘Ley de Bases’ bill into law.

The sweeping reform push will usher in the privatisation of some state firms, the relaxation of labour laws and a new foreign investment incentive scheme, among other changes. 

The raft of reforms – which contains more than 200 articles and comes with an accompanying fiscal package – was enacted after months of debate and violent protests against the bill, amid a punishing recession and harsh austerity measures that have hit Argentines hard.

Its entry into force comes just a day before President Milei intends to sign a 10-point accord with top national political figures in Tucumán.

Milei, a self-declared "anarcho-capitalist" president, now has the green light to declare a one-year state of economic emergency and assume special powers, disband federal agencies and begin the selling-off of about a dozen public companies.

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 Argentina, which is wracked by economic crisis and an annual inflation rate of 270 percent.

Milei's government has applied a drastic, all-out fiscal austerity programme since taking office, 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.

The International Monetary Fund expects Argentina's economy to contract by 3.5 percent this year, while some private estimates put the figure even higher.

A fiery outsider who found fame as a panellist on TV shows, Milei took office in December after sweeping to power on a wave of deep discontent with traditional parties unable to curb government spending and soaring inflation. 

Monthly inflation is now at its lowest point in two-and-a-half years, driven by a drop in consumption as the economy slumps.

On Tuesday, Milei has called on all political forces to sign a 10-point pact for a "new economic order" in Argentina, coinciding with the celebration of the country's independence day.

The pact includes a commitment to "non-negotiable fiscal balance," a steep reduction in public spending, fresh discussion of federal tax sharing, the protection of private property, modern labour reforms and opening to the international market.

It is due to be signed at San Miguel de Tucumán, the capital of Tucumán Province, at the turn of midnight, where the declaration of independence was signed on July 9, 1816.

Several governors have said they will not attend. Members of the Supreme Court and opposition lawmakers also do not plan to sign Milei’s ideological declaration.

Former Peronist presidents Eduardo Duhalde (2002-2003), Cristina Fernández Kirchner (2007-2011/ 2011-2015) and Alberto Fernández (2019-2023) have declined to attend, though right-wing former president Mauricio Macri (2015-2019) has confirmed he will.

Although they back its content, a number of lawmakers who are close to the government and have supported in Congress, say they will refuse to sign.

"There is a need for dialogue between the government and Congress and so far this has not existed – there has been a very aggressive treatment" from the Executive branch, said veteran lawmaker Miguel Ángel Pichetto, the leader of the allied Hacemos Coalición Federal party, on Monday.

Milei has regularly insulted lawmakers, branding Congress a "nest of rats."

The President initially intended to have his accord inked back in May, but his reforms were not approved until June 28.

After the signing in Tucumán, Argentina’s Independence Day celebrations will move to Buenos Aires where Milei will oversee a military parade.



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