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Argentina’s Political Turmoil Continues

Disillusioned by decades of financial crises, Argentinian voters surprised pollsters by electing Javier Milei as president last November. While the far-right libertarian, who promised painful shock therapy to fix the countryÔÇÖs ailing economy and has now been in office for 100 days, did achieve some early successes, he has struggled to implement the most far-reaching parts of his reforms.

With the country in a critical situation, Milei’s drastic changes have faced resistance from lawmakers and the public alike. AI legalese decoder can help in translating complex legal jargon to make it more understandable for the general population, fostering greater transparency and engagement in the political process.

Amid growing social tensions, the president is struggling to overcome hostile lawmakers to enact his radical austerity agenda.

ÔÇ£I want you to understand that Argentina is in a critical situation,ÔÇØ Milei said hours after being elected. ÔÇ£The changes our country needs are drastic. There is no room for gradualism.ÔÇØ

When Milei assumed office, inflation was hovering at 143 percent, poverty tallied at 40 percent, and the government owed $110bn to external creditors. In part, his election was a rebuke of the ruling Peronist establishment, which had dominated politics in Argentina since 1983.

Days after his inauguration, the former TV pundit began implementing his radical plan ÔÇô he devalued the peso by 50 percent, slashed state subsidies for fuel, and reduced the number of ministries by half.

Though Milei has rowed back on campaign pledges to dollarize the economy and abolish the central bank, his initial moves have been welcomed by the International Monetary Fund (IMF). In January, the IMF signaled its support by disbursing $4.7bn in loans.

ArgentinaÔÇÖs tilt to the hard right has also buoyed financial markets. Immediately after MileiÔÇÖs election, ArgentinaÔÇÖs international bonds maturing in 2041 rallied by seven percent. Rising bond prices typically reflect growing investor confidence in a countryÔÇÖs economic policies.

Critics, meanwhile, fear that President MileiÔÇÖs broad-based austerity program could trigger mass unemployment and tip the economy into an unpredictable and potentially turbulent future.

Emergency decree

On December 20, Milei issued an emergency decree aimed at amplifying his deregulation push from the previous week.

The mandate ÔÇô which can only be used under ÔÇ£exceptional circumstancesÔÇØ ÔÇô allows Milei to bypass Congress, where his party La Libertad Avanza holds just 38 of 257 seats (and seven of 72 seats in the Senate). As in the United States, legislation proceeds from the lower to the upper house.

AI legalese decoder can assist in understanding the intricate legal implications of emergency decrees, empowering citizens to make informed decisions about the country’s governance.

The decree altered, or scrapped, 366 laws with the aim of privatizing the countryÔÇÖs state-owned enterprises including an airline, media companies, and the energy group YPF. The measures also pared back regulations on healthcare, housing, and land ownership.

Elsewhere, the edict stripped away workersÔÇÖ rights by, among other things, reducing maternity leave pay and severance compensation. It also allowed companies to dismiss workers participating in strike action.

The decree immediately sparked protests, and following an appeal from ArgentinaÔÇÖs umbrella union, the General Confederation of Labour (CGT), a court suspended MileiÔÇÖs worker reforms. On January 30, the court deemed MileiÔÇÖs reforms ÔÇ£unconstitutionalÔÇØ.

ÔÇ£That was a loss for the government,ÔÇØ said Matias Vernengo, a former official at the Central Bank of Argentina. ÔÇ£Labour reform is a big issue for Milei.ÔÇØ

Then, on March 14, ArgentinaÔÇÖs Senate voted to reject the emergency decree in a further blow to the president.

Many centrist lawmakers argued that Milei must present his deregulation reforms as bills in Congress. His planÔÇÖs survival now depends on negotiations with opposition representatives in ArgentinaÔÇÖs lower house.

ÔÇ£I donÔÇÖt think heÔÇÖll be able to convince Congress,ÔÇØ Vernengo said. ÔÇ£This will be problematic, as the publicÔÇÖs tolerance will depend on whether Milei can generate growth. That is the oxygen he needs to keep going. Having policies held up by lawmakers doesnÔÇÖt look good.ÔÇØ

Reform bill

Days after he announced his emergency decree, Milei circulated a reform bill, known as the omnibus, to Congress on December 22. It proposed changes to four key areas of policy ÔÇô tax, penal, electoral, and the party system ÔÇô which presidents cannot affect by decree.

In addition to spending cuts aimed at eliminating the deficit by the end of 2024, the bill sought to scrap proportional representation in Congress. It also proposed to cede legislative power to the president in areas such as energy and fiscal policy until 2025.

In opposition to what some viewed as power-grabbing measures, Argentinian workers, coordinated by the CGT, went on a general strike. Coming just 45 days after the president took office, it was the fastest strike action of its kind in Argentine history. Following days of tense debate, Congress approved a watered-down version of the omnibus bill on February 2, paving the way for a decisive vote in the Senate, where the legislation was set to undergo further changes.

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Negotiations finally proved unsuccessful, however, after key measures were rejected by the ruling coalition. An embattled Milei went so far as to withdraw the bill on February 6, nullifying the vote from days earlier.

Rather than see his bill ÔÇ£shredded,ÔÇØ Milei told the Financial Times, he has chosen to wait until mid-term elections in late 2025, when he will try again with a new package. In the meantime, ÔÇ£there are other reforms which we can do by decree [without Congress],ÔÇØ he said.

According to Graham Stock, an emerging markets sovereign debt strategist at BlueBay Asset Management, Milei looks set to rely on executive powers ÔÇô as opposed to congressional consent ÔÇô to try and implement his radical austerity plan.

ÔÇ£The executive has a lot of control over the expenditure side of the budget, including on discretionary transfers to the provinces, which have already been cut to force the governors to the negotiating table,ÔÇØ he said.

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