Argentina: Milei’s Emergency Decree Will Test Congress Support for His Agenda

After a day of subdued protests organized by social organizations, Javier Milei took to television to announce a series of measures aimed at deregulating the Argentine economy. Milei's objective is clearly to transition from a state-led economy to a pro-market economy as quickly as possible. His decree targets the modification of over 30 laws in the Argentine economy, including the repeal of the Rent Law, the Supply Law, the Gondolas Law, National Procurement, the Price Observatory of the Ministry of Economy, the Industrial Promotion Law, the Commercial Promotion Law, regulations preventing the privatization of public companies, and the State-owned company regime. Additionally, the transformation of all state-owned enterprises into joint-stock companies for subsequent privatization, the 'modernization of the labor regime,' the reform of the Customs Code to facilitate international trade, the repeal of the Land Law, the modification of the Fire Management Law, and the repeal of the obligations that sugar mills have regarding sugar production.

The decree will be passed as an Emergency decree, meaning that the Argentine Congress will need to analyze each of the laws and then provide a verdict on them. It is worth remembering that Javier Milei’s party, the Libertarian Party, only secured around 5% of the seats. To approve all these laws, Milei will need the support of the center-right force “Juntos por el Cambio,” which was partially fragmented after the announcement of the leader of this coalition, Mauricio Macri, in favor of Milei's support. Indeed, Milei’s cabinet includes some members of Juntos por el Cambio, likely giving him a majority in Congress. Whether it is too soon or not, Milei aims to implement a shock policy. The first one, which almost unifies the official and black market exchange rates, and the fiscal adjustment will have a contractionary and inflationary impact on the economy with the potential to damage Milei’s popularity. Therefore, Milei is betting on approving most of his measures soon, so when the recession takes hold, most of the reforms are already approved.

We believe this is going to be the first test for Milei with the Congress. His anti-political speech could be a barrier to his relationship with the Congress, and there is no doubt that the opposition will do everything to prevent Milei from passing his agenda. Additionally, if the Argentine economy continues to perform poorly, we cannot rule out a situation in which Juntos por el Cambio abandons Milei and seeks to impeach him.