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ECONOMY | 27-02-2024 19:21

Milei’s bold decree teeters as Argentina's provinces resist

Growing opposition to President Javier Milei’s sweeping decree in the Senate puts it at risk of being overturned as regular sessions get underway next week.

Growing opposition to President Javier Milei’s sweeping decree in the Senate puts it at risk of being overturned as regular sessions get underway next week, jeopardising his initial dose of economic shock therapy.

Nine moderate lawmakers mostly from southern provinces sent a letter Friday requesting that senators discuss Milei’s sweeping deregulation plan, on the heels of an escalating dispute over the transfer of funds to Argentine provinces. Alongside the Peronist bloc, which holds 33 seats, the signatories have enough votes to overturn the decree with a simple majority.

Push-back against the decree comes after Milei couldn’t secure enough votes for his much larger omnibus reform package in January, resurfacing investor concerns about his legislative strategy as he seeks to revive the crisis-prone economy suffering through a recession and 250 percent inflation. 

Provincial bonds in Argentina slid Tuesday amid the uncertainty over funding from the national government, with Buenos Aires Province — the country’s largest by population — seeing notes due 2037 drop 2.3 cents to trade as low as 39 cents on the dollar, according to indicative pricing data compiled by Bloomberg. 

The southern province of Chubut has threatened to withhold its oil and gas if it doesn’t receive its share of federal funds — a threat that Tierra del Fuego Province signed onto this week. Milei and his office shot back at Chubut Province Governor Ignacio Torres of the pro-business PRO party, which is aligned with the president, with a series of escalating insults.

Milei called Torres “a poor child who didn’t know how to read a contract” during a television interview. The president argued that the funds had been held back for debts the province owed the national government. 

A majority of Argentine governors have signed onto an open letter Torres published criticising Milei. And a federal judge ruled Tuesday that Milei can’t withhold any further funds destined for Chubut, but didn’t go as far as ordering him to send back the original amount in dispute, newspaper La Nación reported. 

Vice-President Victoria Villarruel, who also presides over the Senate as its leader, is buying time by stalling on the request for a special session, as she did with three previous requests from the Peronist opposition, according to a person familiar with the matter. But time is running out, as regular sessions kick off Friday night. Once those begin, the decree faces a serious risk of being repealed, the person said.

Milei’s deregulation plan can only be repealed if both the lower house and the Senate reject it. His party holds just seven seats in the 72-member upper chamber and about 15 percent of representatives in the lower house Chamber of Deputies. The decree, which has been in place since late December, deregulated various aspects of Argentina’s economy, including steps to privatise companies, facilitate exports and end price controls.

Presidential Spokesperson Manuel Adorni denied that growing tensions between Milei and the governors could potentially derail the decree in his daily press conference Tuesday. Milei will address congressmen at 9pm local time on Friday, his most important speech since his inauguration. He opted for a rare night-time address to ensure he could reach a majority of Argentines, Adorni said.

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by Manuela Tobias, Bloomberg

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