In initial victory for Argentine president Milei, Senate gives overall approval to key reform bills

BUENOS AIRES: Argentina's Senate has approved key state overhaul and tax bills proposed by president Javier Milei, delivering an initial legislative victory to the libertarian leader in his efforts to deliver on his promises of radical change. Senators voted 37 to 36 late Wednesday to give their overall approval to the overhaul bill after 11 hours of heated debate as protesters urging lawmakers to reject Milei's harsh austerity clashed with police outside Congress.The lawmakers still must approve individual measures in an article-by-article vote that will stretch throughout the night.
In a reflection of the fierce backlash to the legislation and deep polarisation gripping Argentina's Congress, vice president and head of the Senate Victoria Villarruel cast the tie breaking vote in favour of Milei's agenda.
The legislation delegates broad powers to the president in energy, pensions, security and other areas and includes several measures seen as controversial, including a generous incentive scheme for foreign investors, tax amnesty for those with undeclared assets and plans to privatise some of Argentina's state-owned firms.
If the Senate approves the articles with modifications, the lower house still has to okay them before Milei can claim passing his first law since entering office last December.
As Senators pored over the bills, protesters in downtown Buenos Aires hurled sticks, stones and Molotov cocktails at police, who fired water cannons and tear gas to disperse the crowds.
The fiery right-wing economist rose to power on promises he would resolve Argentina's worst economic crisis in two decades, with annual inflation climbing toward 300 per cent and a recession deepening.
But his political party of relative novices holds just a tiny minority of seats in Congress, and he has struggled to strike deals with the opposition.
Senators approved two bills, a tax package that lowers the income tax threshold and a 238-article state reform bill that passed the lower house of Congress in late April after weeks of negotiations.
Initially dubbed the "omnibus bill" because of its more than 600 articles, the watered-down version at hand still delegates broad legislative powers to the president in energy, pensions, security and other areas.
The proposal's immense scope - and staunch opposition to it - has limited progress.
"We have the weakest president we've ever seen who is trying to pass the biggest bill we've ever seen," said Ana Iparraguirre, an Argentina-based analyst at Washington strategy firm GBAO. "That's the contradiction."
Unlike previous Argentine leaders since the return of democracy in 1983, Milei has failed to pass a single piece of legislation during his first six months in office. Instead, the populist outsider has relied on executive powers to slash state spending and sweep away economic restrictions.
"Today, it's almost more important for Milei to demonstrate that he can pass laws in Congress than what he passes," said Lucas Romero, director of Synopsis consultancy.
The package has faced tough resistance from the left-leaning Peronist movement loyal to former president Cristina Fernandez de Kirchner, which has dominated Argentine politics for the last two decades and holds sway over the country's powerful trade unions.
Thousands of bankers, teachers, truckers and workers from a range of other unions converged around Congress throughout the day, banging drums, blasting trumpets and chanting, "Our country is not for sale!" and "We will defend the state!"
"If this law passes, we are going to lose so many of our labour and pension rights," said 54-year-old teacher Miriam Rajovitcher protesting alongside her colleagues, middle-class Argentines who say they've had to reconfigure their lives since Milei slashed their school budgets and devalued the currency, sending inflation soaring. "I am so much worse off."
The rally took a tense turn when hundreds of riot officers pushed back with their shields against angry protesters trying to surge through a barrier.
Police used pepper spray, water cannons and tear gas against the huge crowds, while demonstrators set two overturned cars ablaze and threw Molotov cocktails.
Dozens of protesters were being treated by medics in the streets, and police said 20 officers had been injured in the clashes. At least five Peronist lawmakers said they were hospitalised after police sprayed pepper spray in their eyes.
"Today, the government is declaring war on the Argentine people," Peronist lawmaker Cecilia Moreau told reporters outside Congress.
The presidency called protesters "terrorists" and accused them of "attempting to carry out a coup d'etat" by disrupting Congress.
The Peronist bloc controls 33 out of 72 seats in the Senate, while Milei's party, freedom advances, holds just seven seats. The bill needed 37 votes from the 72 total legislators in the Senate to get a majority and ended up with a 36-36 tie.
Analysts say that foreign investors and the IMF, to which Argentina owes a staggering USD 44 billion, are closely watching Wednesday's vote to see whether Milei can build consensus with his opponents to deliver on his ambitions.
Wednesday's article-by-article vote will stretch for hours, with analysts expecting lawmakers to further weaken the most divisive sections of the bills.
One of the most contested measures is an incentive program to spur foreign investments that offer lucrative tax breaks for 30 years, no import tariffs and other perks for big corporations that critics say go too far.
"What this law is hurting most are the pockets of workers, not the big companies that are just going to get richer," said 36-year-old Juan Barreto, a bank employee jostling amid crowds of his fellow union members.
Argentina's unions have also voiced vehement opposition to measures that would make it easier for companies to fire employees, as well as plans to privatise some state-owned companies. The question of which ones will head to auction has generated intense debate.
Backlash to the tax bill has centred on an amnesty that would allow Argentines to register undeclared assets at home and abroad without paying heavy taxes, as well as a lower income tax threshold to boost revenue.
Frustrated by legislative resistance, the president has moderated his previous all-or-nothing approach. Earlier this month, in a bid to break the impasse, Milei fired his politically inexperienced cabinet chief and replaced him with interior minister Guillermo Francos, a career politician skilled at congressional wheeling and dealing.
In recent weeks, Argentina has got a taste of what awaits if Congress fails to pass the bills.
Sovereign bonds have tumbled. The country's currency, the peso, has depreciated as well, widening the gap between the official and black market exchange rate to nearly 40 per cent. The peso was trading at 1,255 per greenback on the informal market Wednesday, a rate far lower than earlier this year.
Even as the IMF has praised Milei's agenda and released tranches of frozen loans, the fund has held back from striking a new deal with Argentina.
Meanwhile, Milei has been in Silicon Valley, rubbing shoulders with billionaire tech executives Elon Musk, Tim Cook and Mark Zuckerberg. The meetings, however, have not produced any announcements of substantial investments.
"What you're seeing in the last three weeks is the market and investors getting a little nervous," said Marcelo J. Garcia, Americas director at geopolitical risk firm Horizon Engage. "The market is saying, show me that you can govern."