The government has suffered an embarrassing defeat after its 2022 budget bill was rejected by Congress, highlighting tensions over the country's economic policies at a time of tense debt renegotiations with the International Monetary Fund.
The ruling Frente de Todos coalition's proposed budget envisaged 2022 growth of four percent, compared to around 10 percent in 2021, and a relative controlling of inflation at 33 percent, well below this year's 50 percent.
The proposal was questioned for months since it was sent to Congress in September and the government's attempts to introduce more than 40 last-minute changes to the text during committee stage this week exacerbated tensions even further.
After a marathon debate lasting more than 22 hours, the bill was finally defeated by 132 votes to 121, with one abstention, early Friday morning in the lower house Chamber of Deputies, where the governing alliance is in the minority.
The budget fiasco is the first example of the problems that face Alberto President Fernández during the final two years of his mandate following last month's midterm legislative elections defeat. Having already been in the minority in the Chamber of Deputies, the Peronist leader's Frente de Todos coalition also lost control of the Senate.
The vote was also a defeat for Economy Minister Martín Guzmán, who spent several hours earlier this week discussing details of the budget in a congressional committee. Efforts to negotiate and win over lawmakers to back the bill failed.
Fernández was meeting with Guzmán and Lower House Speaker Sergio Massa at press time to discuss "how to continue and what possibilities there are'' in the wake of the setback, government sources said.
“The vote reflects a more fragmented Congress following the ruling coalition’s loss in the November 14 midterm elections,” Tomas Arias, a political analyst at XP Investments, told Bloomberg.
Minister Guzmán "proposes an idyllic scenario with growth and low inflation, ignoring the critical situation the country is going through with a fiscal deficit it cannot finance, inflation over 50 percent, an exchange rate gap of 100 percent and a fiscal deficit of three points of GDP," said opposition deputy Luciano Laspina (Juntos por el Cambio, Rosario), explaining the rejection.
At one stage during debate, a number of lawmakers proposed that a vote on the budget be postponed until a later date and that the bill be kicked back to committee stage. However, talks over such a move collapsed after an angry speech from Máximo Kirchner, the head of the ruling coalition's caucus.
"It is powerfully striking that in the face of a very serious situation, those who left this country with a debt of 44 billion dollars have taken this position,” charged Kirchner, the son of Vice-President Cristina Fernández de Kirchner and late former president Néstor Kirchner.
"I wish they had taken such a meticulous and keen look in the past,” he declared. “Let's vote and let's finish with the show."
Speaking after the vote, Kirchner accused the opposition of “playing to see who is tougher,” and said they had “forgotten about the country.”
The lower house defeat means the government will have to extend the 2021 Budget via presidential decree, though paradoxically that could afford it greater leeway in the allocation of resources since the Executive will not be constrained by voted budgetary allocations.
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Guzmán confirmed as much in a post on Twitter on Friday, announcing that the president would “make use of Law 24.156 to extend the current Budget, and manage resources so that 2022 is another year of recovery, with more public capital, education, health and knowledge, and that we can advance on a path of lasting progress.”
“Unfortunately, the opposition decided to leave Argentina without a budget for the year 2022. Not the Government, but Argentina. A lack of collective responsibility that creates uncertainties when what we need is to continue building certainties, ”said Guzmán.
"They have made it clear: they are competing to see who is more opposed to the government, and our Argentina needs this to change."
The government’s defeat sends a negative signal about a lack of macro-economic consensus among Argentina's political class, with the country locked in renegotiations with the International Monetary Fund over its US$44-billion debt.
Reacting to the government’s defeat, PRO party leader Patricia Bullrich twisted the knife by saying that “if the government cannot negotiate a budget with the opposition, it won’t be able to negotiate with the IMF.”
A payment of US$1.8 billion is due to the Fund on December 22, as part of the current calendar that Argentina seeks to renegotiate.
At the beginning of the week, Guzmán said the country can "in no way amortise the repayments of around US$18 billion in 2022 and US$19 billion in 2023."
Already in recession since 2018, the coronavirus pandemic plunged Argentina into an even worse economic crisis. GDP slumped 9.9 percent in 2020, with officials forecasting growth of 10 percent this calendar year.
Guzmán had pencilled in four percent economic growth for 2022 in the budget bill, while the IMF estimates it will be 2.5 percent.
Fernandez was due to speak to IMF Managing Director Kristalina Georgieva Friday afternoon to review the state of negotiations, though his spokeswoman stressed that the call was scheduled before the vote in Congress.
Running at more than 50 percent annually, Argentina suffers from one of the world's highest inflation rates and has a poverty rate of 42 percent for a population of 45 million.