Milei unveils broad reforms to liberalise Argentina's economy

President Javier Milei announced sweeping reforms to reduce the hand of the state in Argentina’s economy, including steps to privatise companies, facilitate exports and end price controls, in a bold political move that’s likely to face pushback in Congress and courts.

The libertarian leader listed 30 initial points of his plan in a televised address Wednesday night, adding they’re part of a broader package containing over 300 measures. He presented the all-around reforms as an attempt to free Argentines from the “oppression” of the state and its bureaucrats, in line with his campaign pledges.

“I’m signing an urgent decree that will kick-start the process of economic deregulation that Argentina needs so much,” Milei said in the speech delivered from the presidential palace in Buenos Aires, flanked by his entire Cabinet. “That change starts today.”

His plan comes one week after Economy Minister Luis Caputo announced deep budget cuts and a 54 percent devaluation of the peso as part of a shock-therapy programme designed to avoid hyperinflation and put the economy back on track. Markets have so far applauded the moves, sending bond prices to two-year highs and keeping the peso’s parallel exchange rates little changed.

Shares of state-run oil producer YPF SA rose more than two percent in early US trading on Thursday after Milei’s announcement, while sovereign bonds inched higher.

Legal battle

While Milei said he’ll send lawmakers a set of complementary proposals, it remains to be seen how far he can go in implementing his plan by emergency decree. What’s certain is that he’ll face opposition in Congress, where he doesn’t have a majority even with the combined votes of the business-friendly coalition that’s likely to support him.

In addition, some of the measures and the decision to legislate by decree are likely to be challenged in the courts, and the opposition has already started to organise demonstrations against his policies.

“It’s quite a bold move for a president with legislative minority,” said Ignacio Labaqui, an analyst for Medley Global Advisors in Buenos Aires, adding that both chambers of Congress would have to repeal the decree to invalidate the measures. “If the president loses popularity, Congress could try to get its revenge.”

Labaqui said the expected political and legal battle over the decree would add uncertainty and prevent new investments in the short term.

The first major protest against Milei took place earlier on Wednesday and was largely contained by an unusually large police force, ensuring few streets were blocked. Some scattered demonstrations were spotted in Buenos Aires after the president’s speech.

Milei, a political outsider with no experience in office prior to the Presidency, won Argentina’s election run-off last month after beating the incumbent Peronist coalition by almost 12 percentage points. His pledges to radically reform the state and end political privileges resonated with voters tired of triple-digit inflation and policy mismanagement in one of the world’s most volatile economies.

Policy changes

Here’s a list of Milei’s initial policy changes, whose architect was Federico Sturzenegger, a former Central Bank chief during the government of Mauricio Macri:

Prepare all state-owned companies to be privatised
Authorise the shareholder control of Aerolíneas Argentinas to be partly of completely transferred to private parties
Deregulate satellite Internet services to allow SpaceX’s Starlink to operate in Argentina
Eliminate price controls on prepaid healthcare plans
Eliminate the monopoly of tourism agencies to deregulate the sector
Repeal the current Rent Law that limits price increases in a bid to normalise the real-estate market
Repeal the current Land Law that limits ownership of land by foreigners in a bid to promote investments
Scrap the current Supply Law that allows the government to set minimum and maximum prices and profit margins for goods and services of private companies
Eliminate the Economy Ministry’s price observatory to “avoid the persecution of companies”