Milei’s radical state overhaul becomes law in Argentina after months of protest

Argentina’s lower house approved President Javier Milei’s sweeping economic overhaul Bills on Friday, sealing a much-needed legislative victory for the libertarian leader after six months of bruising battles and raucous protests that had raised questions about his ability to govern.

Mr Milei’s landmark legislation, which seeks to support his “zero fiscal deficit” plan and attract foreign investment, passed a final vote in the lower house to become law.

The approval — widely expected after the Bills squeaked through the Senate earlier this month despite fierce political opposition — strengthens the president’s hand at home and abroad as economic pressures mount.

Mr Milei rode to power on a promise to pull Argentina out of a dire economic crisis that has deepened poverty and driven annual inflation near to 300%.

Mr Milei’s administration hailed the law’s passing as setting Argentina “on the path toward the free and prosperous country that Argentines chose” in last November’s election.

The government blamed the turbulent process on “obstructionism” by Mr Milei’s hard-line opponents.

Mr Milei’s party controls less than 15% of congressional seats and has so far relied on executive powers to slash public spending and impose the president’s radical small-state vision.

Analysts have said that only congressional approval could offer Mr Milei the support he needs to boost investor confidence in Argentina, a country with a long history of defaulting on payments and breaching contracts.

“This is a major win for Javier Milei,” said Bruno Gennari, Argentina specialist at KNG Securities, adding that the vote had already boosted bonds.

“He had to make substantial concessions to get his first Bill through Congress but the reforms it brings to Argentina are still sweeping.”

The state overhaul Bill with more than 230 articles passed the friendlier lower house comfortably. The lower house of Congress, known in Argentina as the Chamber of Deputies, had already approved the content of the legislation in April, sending the Bills to the Senate for further debate that ended with a closely fought vote.

This time, the Chamber of Deputies held an up-or-down vote to the amendments that senators had made during their June 13 session.

Politicians approved the modifications early on Friday and much of the 12 hours of heated debate focused on an income tax for one million more workers and a wealth tax championed by cash-strapped provincial governors.

The legislative package includes major incentives for foreign companies investing heavily in Argentina, a plan to privatise some state-owned companies and a contentious expansion of presidential powers over economic policy.

Much criticism of the Bill has focused on the incentive scheme, which the government says is crucial for its goal to eventually lift capital controls but sceptics say goes too far in privileging foreign firms with lucrative tax breaks and other perks.

Labour deregulation measures allowing employers to fire workers for participating in protests also passed despite fierce backlash from the country’s powerful trade unions that rallied outside Congress on Thursday, shouting against Mr Milei and banging drums.

Although the law heralds a significant shift away from the budget-busting economic model of the country’s left-leaning Peronist movement, it has been significantly watered down from Mr Milei’s original proposal, which boasted more than 600 articles.

For instance, Mr Milei entered office planning to privatise more than three dozen state companies, including big names such as the flagship carrier Aerolineas Argentinas, the national bank and state oil company. In the end, he managed to get approval for the sale of just six lower-profile public firms such as the Buenos Aires sanitation provider.

Mr Milei, who has characterised himself as a “mole” seeking to destroy the state from within and derided politicians as “rats”, has run into obstacles winning over political allies.

In recent weeks he sacked his Cabinet chief and assigned negotiations with the opposition to interior minister Guillermo Francos, who has close ties to a range of political parties.

Signalling he would capitalise on his momentum to achieve further accords, Mr Milei announced he would invite governors and other powerful politicians to come together on Argentine Independence Day, July 9, to sign a grand national pact committing to his overhaul.

Still, analysts said that the vote, after months of congressional paralysis, underscores just how polarising Mr Milei’s agenda remains.

“Milei can get a law to pass Congress, but it took him a long time,” said Lucas Romero of the political consultancy Synopsis. “The time it took indicates the legislative weakness with which he governs.”