Thursday, July 18, 2024

OP-ED | 15-06-2024 06:50

Bases loaded with grand slam yet to come

The Senate vote was a close-run thing but perhaps Milei gains more from near defeat within Congress and violence outside than from a comfortable and peaceful victory.

Senate passage of the ‘Ley de Bases’ omnibus bill thanks only to a vice-presidential tie-breaking vote in the closing minutes of Wednesday does not seem the firmest mandate for conferring legitimacy on reforms of this scale and ambition (even if heavily diluted after being presented in two different versions passing through two legislative stages with constant amendments) but it also invites comparison with the last time a veep had to break upper house deadlock – the famous “not positive” vote of Julio César Cleto Cobos in 2008 to nix steep farm export duty increases. Then, as now, the draw within a Senate elected by the popular vote of as much as five years previously did not reflect the public opinion of the moment. Back in 2008 a clear majority interpreted the export levies as a transfer from the most productive sector of the economy to the least, with the timid vote of Cobos vindicated in the next election – today there can be no doubt of a groundswell for change as such, even if spelling it out in specific changes often encounters majority rejection as witnessed by the multiple amendments.

In this sense the Senate vote has legitimacy, granting the Javier Milei administration a governability in doubt until now. It was also an impressive, indeed almost miraculous achievement for a ruling party with one senator in every 10 and one deputy in every seven, all the more remarkable for coming amid a deep recession.

Much went by the board – such totems of Kirchnerism as Aerolíneas Argentinas and the pension moratoria survive – but such central pillars as the delegation of legislative powers, the fiscal package (albeit with the huge absence of income tax restoration, rejected by a 41-31 vote) and a marginally tweaked RIGI investment incentive scheme all gained approval, empowering the government perhaps more than most people realise. RIGI was the priority for foreign investment and the limits installed by the senators were relative – the sectors for the scheme were restricted to infrastructure, mining, energy, technology, farming and forestry but hardly any other sector is competitive, at least 20 percent of suppliers must be local and the liberation from capital controls is to be phased (complete in four years).

Nor should all the amendments be seen as hostile to economic modernisation, apart from sometimes reflecting valid social and environmental concerns rather than the defence of corporate interests (such as the preservation of Tierra del Fuego’s tax breaks by a stunning 65-6 vote) – thus obliging the conclusion of all public works which are 80 percent complete is surely better for reversing infrastructural neglect than the blanket freeze initially imposed in the name of achieving fiscal surplus. 

A close-run thing but perhaps Milei gains more from near defeat within Congress and violence outside than from a comfortable and peaceful victory. The parity in Congress keeps his obsession of a perversely selfish “caste” frustrating his reforms alive and kicking within public opinion – the “not positive” vote of Radical Senator Martín Lousteau against the omnibus bill (despite his key role in ensuring quorum and even though voting in favour of the fiscal package) even permitted Milei the luxury of lumping the Radicals within the “caste” although the 36 favourable votes included 12 Radical senators.

Milei can also take advantage of Wednesday’s stones and Molotov cocktails setting two vehicles ablaze to demonise the opposition and victimise himself, although a more dispassionate look at the violence might take it as proof of Newton’s third law that action and reaction are equal and opposite – without the aggressively massive police deployment mounted by an overacting Security Minister Patricia Bullrich creating as much as anticipating trouble, the protest might have been even more peaceful than it generally was. The violence from what appears to be a lunatic fringe of demonstrators was unacceptable but the tear gas suffered by five deputies among others makes police brutality even harder to deny.

The omnibus bill still has some way to go before it can be published in the Official Gazette but there is final assurance that there will be a law – the deputies now face the choice between their version or the Senate’s but not nothing at all. Yet this is not end of story. This bold legislation does nothing to advance the deep tax, labour, pension and other structural reforms required – all the RIGI schemes in the world will not bring in overseas investors until capital controls are gone and a solid currency consolidated. In Winston Churchill’s words, the end of the beginning rather than the beginning of the end.

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