The reform package announced by Javier Milei to 'rebuild the Argentine economy'

The president of Argentina, Javier Milei, announced this Wednesday a plan that contemplates the reform of more than 300 regulations to lay “the foundations for the reconstruction of the Argentine economy and return freedom and autonomy to individuals, getting the State off their backs.”

According to Milei, who just three weeks ago assumed the presidency after defeating the Peronist Government's Economy Minister, Sergio Massa, in the second round, Argentina can once again be “a world power”, as at the beginning of the last century, but for that It is necessary to “dismantle the enormous amount of regulations that have prevented, hindered and stopped economic growth.”

The urgent need decree (DNU) that was published in the Official Gazette and that in the coming weeks will be debated in extraordinary sessions of Congress of the Nation convened in the middle of the summer holidays, seeks to transform “all” state companies into public companies for their “later privatization”, in order to deregulate the Argentine economy.

(Also read: 'He who cuts does not get paid': Argentina will remove aid from those who block roads in protests)

“We received the worst inheritance in history,” said the Argentine head of state, who referred to the burden inherited from the governments of recent years, mostly of a Peronist nature, as “the consolidated deficit of 15% of GDP, the highest tax pressure in the world, the lack of reserves in the Central Bank, destroyed credit confidence, unbridled monetary issuance and the annual inflation crisis of 15,000%.”

What are the changes that Milei proposes? We tell you.

The reform package announced by the president

In the ad, Milei referred to the modification of 30 laws, although the megadecree has a greater number of provisions throughout its 83 pages. To provide for all these regulatory modifications, the decree provides for the declaration of the economic emergency for a period of two years, from which Milei attributes the power to reform by decree a broad set of laws.

The government plan includes measures as forceful and dissimilar as the repeal of the Rental Law, the possibility for football clubs to become public limited companies if they so wish, or the authorization of the total or partial transfer of the Aerolíneas Argentinas shareholding package.

But it also contains others that point directly to the deregulation of economic activity, such as the repeal of the Supply Law, which contemplates sanctions for companies in cases of shortages of certain products, and the Gondola Law, which forces supermarkets to offer a minimum of products manufactured by small companies.

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The repeals also include regulations that prevent the privatization of state companies, such as the oil company YPF. The private medical care system will also be reformed and satellite internet services will be deregulated to allow the entry of companies such as Elon Musk's Starlink.

In addition, the measures announced on national radio and television establish the reform of the Customs Code to “facilitate” international trade and that “prohibiting exports is prohibited,” in the words of Milei.

Other measures include eliminating price controls on prepaid health plans, eliminate the monopoly of tourism agencies to deregulate the sector and repeal the current Rental Law that limits price increases in an attempt to normalize the real estate market.

In addition, it is proposed to repeal the current Land Law that limits the ownership of land by foreigners. In an attempt to promote investments, repeal the current Supply Law that allows the government to set minimum prices and maximums and profit margins for goods and services of private companies and eliminate the price observatory of the Ministry of Economy to “avoid the persecution of companies.”

He also proposed the “modernization of the labor regime” and the repeal of the obligations that sugar mills have in terms of sugar production.

Argentina is in a serious economic crisis, with year-on-year inflation of more than 160% and a poverty rate that exceeds 40%.

Milei, who assumed the presidency on December 10, had already presented a broad austerity plan last week, which includes the elimination of subsidies for transportation and public service rates and paralyzes the construction of infrastructure works financed by the State.

The Minister of Economy, Luis Caputo, also announced a week ago a devaluation of the peso of 54 percent as part of shock therapy designed to prevent hyperinflation and get the economy back on track.

(Also: Javier Milei's government devalues ​​the Argentine currency to 800 pesos per dollar: what does it imply?)

The objective is to cut public spending by the equivalent of 5 percent of the Gross Domestic Product.

So far, markets have applauded the measures, sending bond prices to two-year highs. and maintaining the parallel peso exchange rate unchanged.

Political scientist Lara Goyburu says that “this message (from Milei) is not surprising because it is nothing that Milei did not say he was going to do during the campaign. But it is surprising that the measure is taken in this way, with a decree of the need to urgency”.

“I think the hope of many of his voters was that Argentine institutions would stop these things. And today perhaps they are finding that everything that was promised is going to be done,” he added.

How did the Argentines react?

After Milei announced this plan, hundreds of protesters gathered near the headquarters of the National Congress. to continue with the protest that hours before had been carried out by some three thousand people who walked through the streets of downtown Buenos Aires to end up gathering in the emblematic Plaza de Mayo, in front of the Casa Rosada, headquarters of the Presidency of the Republic.

The nighttime mobilization was also felt in various neighborhoods of the capital, where the neighbors staged a loud protest from their windows and balconies, banging pots and other household utensils.

As Efe was able to verify, the protest action was heard in several areas of the city, including some of the most affluent, such as Palermo and Belgrano, but also in more modest neighborhoods such as Caballito, Almagro and Avellaneda.

(You may be interested in: These are the 10 measures of the emergency economic plan announced by the Milei government)

“I am here because I am terrified by the decree. I have come to put a stop to it, so that the street sets the pulse,” Nicolás Waiselbaum, a 48-year-old teacher, told AFP.

Leopoldo Maldonado, a 25-year-old student, said that “the measures are very negative.” “I am especially concerned about the rental law and the labor reform. It is already very difficult for young people to get a stable job, and if this happens ten days” after taking office, he lamented.

Hours before, the first social protest against Milei ended with a lukewarm call and without major incidents, largely due to the strong deployment of members of the Federal Police and the Gendarmerie anti-riot units.

But the warnings issued by the Minister of Security, Patricia Bullrich, and by President Milei himself, that whoever occupied public roads or blocked roads would stop receiving social aid plans for the most disadvantaged, also weighed, at a time when four of Every ten Argentine families live below the poverty line and destitution affects ten percent of the population.

After reading a manifesto titled “Down with the chainsaw adjustment plan
Milei and the IMF”, in which the organizers asked the union centers – today absent – to join future mobilizations and accused Minister Bullrich of “criminalizing social protest”, the protesters began to withdraw from the Plaza de Mayo.

Is the decree already firm?

The decree was published at midnight in the Official Gazette, making it effective. However, it must be brought to Congress for analysis in a bicameral commission within a period of 10 days.

It would only be invalidated if it is rejected by the Chamber of Deputies and also by the Senate, explains constitutional lawyer Emiliano Vitaliani.

Milei's party, La Libertad Avanza, has only 40 of the 257 seats in the Chamber of Deputies and just seven of the 72 seats in the Senate.. The center-right coalition Together for Change, partially allied with Milei, has 81 deputies and 24 senators.

(In other news: Milei's Government announces deep audits in all ministries of Argentina)

There are also 26 deputies and eight senators who are dissidents of Peronism or belong to provincial parties. And Peronism, in the opposition, is the first minority in both chambers, with 105 deputies and 33 senators. The left has five deputies.

Thus, what is certain is that he will face the opposition in Congress, where he does not have a majority even with the combined votes of the pro-business coalition that is likely to support him.

Some measures are likely to be challenged in court, and the opposition has already begun organizing demonstrations against his policies.

INTERNATIONAL EDITORIAL
*With AFP, Efe, Bloomberg and La Nación (GDA)