How Comprehensive Is the Reform Package That Javier Milei Has Proposed for Argentina?

The Argentine President, Javier Milei, has submitted a comprehensive reform bill to Congress, outlining significant modifications to the nation’s tax system, electoral law, and public debt management.

The effort to transform South America’s second-largest economy through an all-encompassing bill necessitates the endorsement of legislators in both houses of Congress, where Milei’s coalition has a limited number of seats. 

What Are the Bill’s Most Important Changes and Reforms?

The bill contains 664 articles that cover a wide range of topics, including the divesting of 41 public companies, the elimination of the presidential primary vote, and the introduction of a comprehensive 15% tax on most exports of goods.

In addition, the government has suggested an increase in taxes on exports of soy and its derivatives from 31% to 33%. Argentina holds the top position globally in terms of processed soy exports.

The bill proposes the implementation of tax exemptions for Argentines, providing them with the opportunity to disclose and bring back undisclosed assets like stocks, cryptocurrencies, and cash.

An overhaul of the handling of public debt would entail the removal of restrictions on sovereign bonds issued internationally and the easing of specific requirements for debt restructuring.

Modifications to Argentina’s electoral system would increase the number of lawmakers per district, allowing for better representation of the population. According to a note to clients by consultancy firm 1816, this change would grant more significant influence to the populated region of Buenos Aires in the lower house of Congress.

One of the more contentious reforms proposed involves granting the presidency some legislative power till December 31, 2025, via the possibility of extending it for an additional two years. 

What About the Presidential Decree That Milei Has Presented?

Markets cautiously embraced Milei’s recent presidential decree to deregulate the economy. The decree, which took effect on December 29, brought about significant reforms, including the removal of export limits.

The decree needs to be reviewed by a legislative commission to assess its constitutionality. It will remain in effect if both Congress and the Senate decide against it.

In contrast to the change bill, the presidential order does not incorporate any modifications to the tax and electoral system. According to Argentina’s constitution, these changes must be subjected to congressional debate. 

How Long Is It Possible That the Reform Bill Will Need to Be Passed?

The government of Milei swiftly submitted the bill to Congress on Wednesday and has urged for special sessions to expedite its reform agenda.

The additional sessions have been planned until January 31, which means that the usual break until March will be shortened. Lawmakers will establish commissions to examine the proposals, potentially incorporating insights from experts and elected officials.

Some of the measures being proposed would need an absolute majority to pass, like electoral reform, which experts caution could slow down the progress. There is no specific timeframe specified for the legislation to be discussed. 

In the House of Representatives, How Powerful Is the Position of the Government?

Milei’s coalition, La Libertad Avanza, has a limited number of places in the lower house, so they need to gather more support in order to make progress.

If the lower house ultimately passes the bill, it will then move to the Senate. However, it is worth noting that the government holds less than 10% of seats in the Senate, making its position even weaker.

Analysts caution that Milei may encounter challenges in advancing his reform agenda due to his limited party support and lack of a majority in either chamber.

“I’m wondering if Milei is receptive to making changes or if he wants the bill to pass without any amendments,” stated Ignacio Labaqui, the chief analyst at Medley Global Advisors in Buenos Aires, Argentina. If he chooses the second option, he would be openly challenging the authority of the judiciary and confronting a significant risk of failure.

Protests against Milei’s agenda have been held in various cities since he assumed office on December 10.