Milei proposes a ceasefire on its omnibus law and abandons its main tax reforms

President Javier Milei has asked for a ceasefire in the midst of the war that has pitted him against provincial governors and a good part of the Argentine Congress in recent weeks. Late on Friday, the Government announced that it will eliminate the major tax reforms proposed by its State reform megalaw in the hope that the measure will satisfy what it calls the “reasonable opposition”, which in a couple of days went from approving —with many reservations— the opinion of the law for voting in Parliament to condemn her to death. After a very long week, in which he faced his first general strike by the unions and fired one of his ministers amid accusations of leaking information to the press, Milei is preparing to face another. The Argentine Government is convinced that it will now be able to approve its omnibus law.

The law of more than 500 articles with which Milei seeks to gain emergency legislative powers ran aground this Friday after almost a month of negotiations. The reform of the system that measures pension increases and the increase in taxes on regional exports ended up confronting the Government with the majority of congressmen from the center to the right and with the governors that it hoped to convince to approve the law.

Since mid-January, the Government has stated that it has not negotiated the content of the law that aims to modify a good part of the political, economic and social structure of the country, but it has been giving in to the loneliness of its minority in Congress. Milei no longer seeks up to four years of special powers that allow him to govern by decree, now he only asks for two, and has backed down on other issues. Milei accepted the “errors” in the writing of the Security chapter, in which an article proposed controlling meetings of more than three people in public, has eliminated the oil company YPF from the list of the 41 state companies that it intends to privatize, and has reversed the definancing of the National Film Institute or the closure of the National Fund for the Arts, which finances scholarships for artists and whose intended closure has called on cultural workers to protest in the streets of Buenos Aires.

Milei had also backtracked on his intention to modify the pension formula by decree to maintain the quarterly increase scheme that, scheduled for March, will arrive late with inflation that only exceeded 25% in December. The proposal did not satisfy the opponents who are negotiating with the Government, the PRO of former conservative president Mauricio Macri, the center-right Radical Civic Union, and a broad bloc of federal Peronists and other minority forces, who also do not accept the current formula. The Government had also agreed to reverse the collection of withholdings of up to 15% on exports from agricultural producers in provinces far from Buenos Aires, but its intention to maintain increases of up to 33% on products such as flour, oil, corn or fishing, ended up angering the governors.

The announcement that these two measures, along with others such as the relaxation of money laundering or the remission of default interest, will be eliminated from the law, came while the country was speculating about the dismissal of Guillermo Ferraro, one of the architects of the victory. of Milei in the November second round who had been appointed Minister of Infrastructure, a megaportfolio that condensed Public Works, Energy, Transportation, Mining, Telecommunications and Housing.

According to what the local press reconstructed, Ferraro had leaked to the newspaper Clarion a tantrum from Milei against the governors who were tightening the negotiation rope. “I'm going to leave them penniless, I'm going to melt them all down,” the president reportedly said in a cabinet meeting this week, while racing against the clock to convince that “reasonable opposition” to vote on the law.

The threat was not the first that the Government made in public. Both the presidential spokesperson, Manuel Adorni, and the Minister of Economy, Luis Caputo, have been warning the rest of the political spectrum for weeks that, if the law is not approved, the fiscal adjustment will continue to fall on the population. “If any of the economic articles are rejected, there will be provincial items that will be cut immediately,” Caputo threatened on Wednesday, but two days later he was in charge of announcing at a press conference that in the end he will eliminate the articles in dispute. “In no way does this imply that we are going to abandon our commitment to achieve fiscal balance, our goal of zero deficit. What we do not want is for something that we consider necessary and urgent to be delayed due to this fiscal chapter. The eyes of the world are on this change,” said the Minister of Economy.

Having closed 2023 with a fiscal deficit of 3%, the question now is how the Government will meet its goal of bringing it to zero or even ending 2024 with a surplus, as promised to the International Monetary Fund. The IMF has reopened the valve so that Argentina receives foreign currency to pay its debt to the organization as long as Argentina maintains the fiscal adjustment. This week Milei returns to the examination table: the Fund's board of directors will meet next Wednesday to define whether to release the funds necessary for Argentina to breathe without debt until April. The approval of the law, which according to the Government will be discussed in the lower house of Congress on Tuesday, will be essential.

The Minister of the Interior, Guillermo Francos, stated this Saturday that “there are already agreements” to approve the extraordinary powers of Milei and that he hopes that the project will pass to the Senate “quickly.” The President and Caputo decided to withdraw the fiscal part and meanwhile advance the law in the part for which we have consensus,” Francos stated.

Peronism warns that Milei's concessions have “traps”

Milei has backed down on the points demanded by the opposition with which he is in dialogue, but he will not accept that he is not given emergency legislative powers. The law proposes a declaration of public emergency for one year – extendable for another – so that the Executive has legislative powers on economic matters, among others. “All presidents have had extraordinary powers. “Everyone has had that opportunity,” said the Minister of the Interior this Saturday, who stated that the Government has the votes to approve its law.

For Peronism, which has the first majority in Congress and has refused to participate in the negotiations, Friday's announcement is a trap. “Milei just wants superpowers (delegated powers). It is the heart of the law,” the head of the Peronist deputies, Germán Martínez, wrote on his networks. The consensus that Milei has remains to be seen. On Tuesday the deputies will meet and, whether or not the law passes to the Senate, the session will be historic, with more than 500 articles to discuss one by one the future of a country in crisis and with no other proposals than a leap into the unknown.

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