The far-right president of Argentina, Javier Milei, obtained an important legislative victory this Wednesday, the first in more than six months of Government. The Senate approved the so-called Bases Law, a range of structural reforms that open the door to a drastic reduction of the State, the deregulation of the economy and labor legislation, and broad benefits for investors. In one of its most conflictive points, the law cedes legislative powers to the president, who will now be able to dispense with Congress to carry out part of his reforms. In political terms, the Government has managed to overcome its parliamentary weakness: it has only 38 of 257 deputies and 7 of 72 senators. To gain the vote of the moderate opposition, Milei left behind more than half of the 664 articles of the draft of the Base Law that he had presented in December and that was rejected in the Chamber of Deputies. In this second attempt he negotiated, gave in, and, at least for a time, avoided calling members of Congress “rats.”
The Base Law must now return to Deputies to approve the modifications. It is expected that the entire process will be completed before the end of June. The markets celebrated Milei’s legislative success with a rise of up to 10% in the value of the shares of Argentine companies listed on Wall Street and 4% in sovereign bonds. In less than 48 hours, Milei also managed to get China to postpone the cancellation of a debt of 5,000 million dollars and for the IMF to approve the disbursement of 800 million that are part of the current refinancing agreement. The multilateral organization celebrated the drastic reduction of the fiscal deficit, which went to surplus in less than six months, and the drop in inflation from 25.5% monthly in August to 4.2% in May.
The sum of good macroeconomic figures should not, however, hide the very high social cost of such an adjustment. The World Bank said this week that Argentina’s gross domestic product will fall 3.5% in 2024, instead of the 2.4% it had predicted in April. The recession is felt especially strongly in construction and industry, with year-on-year drops in activity of 30% and 19.6%, respectively. Commerce, linked to consumption, has plummeted by 16.7%. It is easy to imagine the impact that these figures will have on employment.
The far-right Government now has the tools it asked for to reverse this situation. The challenge is economic, but also political. Milei bases his popularity, which is around 50% since he took office in December, on constant attacks on what he calls “the caste”, a diffuse list of politicians, businessmen and union members whom he considers guilty of “100 years of decadence.” Until now she has used “caste” as an alibi to justify the management problems she is experiencing. During the last month, she has lost her chief minister and can barely hide the disaster that plunges the Ministry of Human Capital into ineffectiveness, where she merged the former portfolios of Labor, Social Development, Education and Culture into a single structure. His detractors are not surprised: the president often says that he is “a mole” who came to power “to destroy the State from within.” In that war, he proclaims himself at the head of a libertarian celestial crusade on a planetary scale. Now, with the tools that Congress has given him, he has to demonstrate that he is capable of finding earthly solutions to the real problems of Argentines.
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