Argentines gather in front of the National Congress in Argentina to celebrate that the ruling party could not continue the debate on the “Omnibus Law” because they were losing votes on every article of its general content, in Buenos Aires, Argentina, on February 6, 2024.
Anadol | Anadol | Getty Images
Argentine President Javier Milei accused governors of trying to “destroy” his sweeping economic reform bill, shortly after his ruling party suddenly withdrew the package from the country’s lower house.
The so-called “omnibus” bill, which had received broad-based support from opposition MPs last week, was rejected in an article-by-article approval process on Tuesday.
The package of measures is a key tenet of Milei’s push to reform Latin America’s third-largest economy. Among other issues, the bill seeks to privatize state entities, increase penalties for social protests and roll back some environmental protections.
Milei’s Libertad Avanza party pledged to send the bill back to committees to be discussed when governors “understand that it is the people who need it, not the government.”
In an official statement on the social media platform X, the presidential office of Argentina She said the governors “decided to turn their backs on the Argentines to protect their interests and prevent the national government from having the tools to solve Argentina’s structural problems,” according to a Google translation.
The libertarian leader, who won the presidential run-off late last year, said there was no alternative to the “shock therapy” he proposed if the government wanted to bring Argentina’s deep economic crisis under control.
Argentines’ purchasing power has been devastated by an annual inflation rate of more than 211%, the highest level in 32 years, while two in five citizens now live in poverty after decades of financial mismanagement.
“The defeat of Milei’s omnibus bill in the House plenary debate says a lot about the government’s political ‘inexperience’ and is the consequence of trying to fit all the reforms into one mega bill”, Jimena Blanco , head of Americas at-risk consultancy Verisk Maplecroft, told CNBC via email.
Javier Milei, president of Argentina, during a visit to the Yad Vashem Holocaust memorial center in Jerusalem, Israel, Wednesday, Feb. 7, 2024.
Bloomberg | Bloomberg | Getty Images
Blanco said a fundamental mistake was the government’s assumption that the majority of votes won in November’s election would be enough to force the “caste,” as Milei called the political establishment, to pass the bill or expose yourself to being punished according to public opinion. surveys.
“The reform bill is now back to square one, but with the aggravating circumstance that the initial willingness of some opposition blocs to negotiate and collaborate with the executive has been eroded, and some are openly annoyed by what they consider legislative amateurism,” he said. added.
‘Plan B’
JPMorgan economist Diego Pereira said Tuesday that the lack of congressional support for the bill suggests the Milei administration should reconsider its policy strategy, “opening a more challenging period that could lead to more volatility.”
“This is an unprecedented event and there is no memory of an administration having had its first piece of legislation rejected,” Pereira said in a research note. He added that a “plan B” may now be in sight as Milei vowed to continue with his reform agenda.
“In this context, the possibility that President Milei will call a non-binding referendum becomes more likely. It is worth noting that during the campaign Milei referred to the possibility of calling a non-binding referendum if he faced an impasse to Congress,” Pereira said.
Milei, who is often compared to former US President Donald Trump, is currently in Israel on his first bilateral trip abroad.
— CNBC’s Michael Bloom contributed to this report.