Hundreds of protesters threw petrol bombs and clashed with riot police outside Argentina’s parliament yesterday after the senate narrowly approved the first stage of a sweeping austerity package backed by President Milei.
The reforms, including pensions cuts and tax incentives for foreign investors, form the foundation of an economic “shock therapy” plan that Milei hopes to bring to the South American nation.
The legislation, called the Base Law, has taken months to work its way through Argentina’s upper and lower houses, and has been significantly amended from its original version.
After a marathon 21-hour debate in the senate that continued until the early hours of yesterday, the vote was drawn at 36-36. Victoria Villarruel, the vice president and head of the chamber, broke the tie by supporting the bill.
“For those Argentines who suffer, who wait, who do not want to see their children leave the country … my vote is affirmative,” she said.
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Outside there were scenes of mayhem, as the police fired rubber bullets, tear gas and water cannon to disperse protesters who vowed that they would go to almost any lengths to stop Milei from carrying out what they portrayed as a package targeting the poor.
“This poison has failed several times in Argentina and we won’t allow this to carry on,” Luis D’Elia, the activist and picket leader, said.
Two cars and a row of city hire bicycles were set on fire during the protest. At least 20 police officers were injured and 15 people were arrested.
Supporters of the reforms pointed to the protests as proof of why the country needed change.
“Today there are two Argentinas,” Villarruel said. “A violent Argentina that sets a car on fire, throws rocks and questions the exercise of democracy. And another Argentina, with workers waiting with great pain and sacrifice for the change that they voted for.”
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Milei’s office issued a statement thanking the police and security forces for their handling of “terrorists” who were attempting a coup d’état.
“We are going to change Argentina, we are going to make it the most liberal country in the world,” Milei told a conference in Buenos Aires.
Included in the reform package are measures designed to make the country more attractive, including a 30-year tax break for investors and the weakening of labour laws that heavily favour employees at present. It also includes plans to privatise about a dozen public companies.
Other measures among the bill’s 238 articles deal with reducing access to minimum retirement allowances, and have been criticised by Milei’s left-wing opponents.
Argentina has been ranked as one of the most expensive countries in which to run a business, in part because of the prohibitive costs that companies need to pay to dismiss workers. For decades, trade unions in Argentina have played a dominant role in the country’s politics — a legacy going back to the time of Juan Perón, the army general who became president in 1946, promising to protect workers’ rights.
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His followers, Peronists, have ruled the country for much of the past 70 years, during which time Argentina’s economy, once one of the strongest in the world, has been mostly in decline or stagnation.
Milei, a right-wing economist and former television pundit, totally rejects Peronism and has instead expressed his admiration for free-marketeers — including Margaret Thatcher, an especially controversial position in Argentina, where feelings still run high over the Falklands conflict of 1982.
A fierce critic of left-wing politicians of all guises, the president believes that only free enterprise capitalism, with absolutely minimal state interference, can lift people out of poverty.
The self-described “anarcho-capitalist” took office in December on a mandate of radical economic reform. His push for a balanced budget marks a stark reversal from that of most Argentinian governments over the past two decades, which have built up vast deficits financed by printing money.
Since 2001 Argentina has defaulted on its international sovereign debt three times, a world record.
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Milei famously brandished a chainsaw on the campaign trail as he vowed to slash public spending.
“What happened tonight is a triumph for the Argentinian people and the first step to recovering our greatness,” Milei’s office said in a statement. He also called the measures the “most ambitious legislative reform of the past 40 years”.
But the legislative battle is not over yet. The package will need to return to the lower house of Congress for final approval.
The resistance it will continue to face was clear throughout Wednesday night. Five serving members of Congress were among a group of protesters who were pepper-sprayed and needed hospital treatment. Dozens of others received medical attention at the scene, according to the health ministry.
Protesters were heard to chant: “The country is not for sale”, and one banner held aloft read: “How can a head of state hate the state?”
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One demonstrator, Miriam Rajovitcher, 54, a teacher, said: “If this law passes, we are going to lose so many of our labour and pension rights. I am so much worse off.”
Another, Fabio Nunez, 55, a lawyer, said the law would put Argentina “ back 100 years”, reported the AFP news agency.
In order to get the legislation passed, the government put on hold some of its more controversial privatisation plans, including proposals to sell off the Aerolíneas Argentinas state airline and the national post office.
Only a handful of state-owned firms, such as the national nuclear power company, are now likely to be privatised in the short term.
Another unpopular measure, to lower the income tax threshold to include thousands more workers, also failed to pass the second round of Senate voting.
Milei’s political party, Freedom Advances, which was founded only three years ago, holds only 15 per cent of seats in the lower house and 10 per cent in the Senate, limiting his ability to push through his promised reforms.
Argentina’s bonds were sharply up on international markets on Thursday as investors welcomed the passing of the reform package.
Trust in maverick leader rests on voters seeing change soon
There are many ways President Milei stands out from conventional politicians: the haircut, the pantomime theatrics, the unusual adoration of his sister, to name but three (Stephen Gibbs writes). But one character trait his supporters point to is seen as especially rare in the present global political class. They say that Milei is honest.
There was some evidence of that when he took office six months ago. In his inauguration address, outside the congress building where Thursday’s riots took place, Milei gave a downbeat speech. “We know that in the short term the situation will worsen, but soon we will see the fruits of our effort,” he said.
So, what has he done so far, and are the fruits of that effort yet apparent?
The government says its main achievement so far is to balance the budget. Cutting the number of government ministries by half and ending policies such as state subsidies for fuel have meant that in the first three months of this year the government earned more than it spent. The last time that happened was 16 years ago.
The other target of his administration has been inflation. The headline figure still looks bad: about 290 per cent a year. But that is a taming of the price rises that Milei inherited from the previous administration of President Fernández, when the country was on the brink of hyperinflation.
Many of the most radical policies that Milei promised he would introduce have been delayed, as the reality of governing without a strong legislative majority takes hold. So, the central bank — which, when he was a presidential candidate, he promised to “burn down” — is still operative. And the US dollar, which he pledged to introduce, is not legal tender yet.
Milei was elected because millions of Argentinians wanted something different. They took on board his message that no country can be turned around in a matter of weeks, that reforms can and will hurt. But their trust of their maverick leader will wane unless he delivers more of what he promised, and soon.
