Milei's Sweeping Reform Package Triumphs in the Legislature's Lower House

In exchange, the libertarian president had to scale back some of his free-market ambitions.

Argentine President Javier Milei achieved a significant milestone on Friday after the lower house of Congress approved his sweeping free market reform package, clearing one of the biggest hurdles on his path. 

After three days of heated debate and amidst opposition pressure to thwart the entire reform package, the lower chamber of deputies approved the controversial legislation with a vote of 144 in favor and 109 against. After a short recess, lawmakers are expected to vote on the legislation article by article, beginning on February 6.

When Milei assumed the presidency on December 10, he promised to shock the economy out of its economic crisis. The South American country is dealing with the world's highest inflation at 211 percent, as well as a large fiscal deficit and depleted foreign currency reserves. 

After devaluing the peso by more than 50 percent, cutting state subsidies, and reducing the number of ministries by half, Milei presented a package that encompasses most of his plans to transform Argentina into a free market economy. The 351-page bill proposes to deregulate and modify laws governing fiscal matters, labor, the environment, health, and more.

Holding just 28 of the chamber's 257 seats, Milei's party, La Libertad Avanza, was able to gain enough support to pass the bill only by dropping a number of key measures. About half of the changes in the original bill survived. Several fiscal measures were dropped, including tax increases on exports—one can dispute whether those qualify as a free market reform—and modifications to the pension system.

Milei's government also agreed to reduce the number of state-run companies it promised to privatize. Originally aiming to jettison 41 state-owned companies—including the flagship airline, Aerolíneas Argentinas; the country's largest bank, Banco de la Nación; and the news agency Télam—the revised bill now targets 27 companies. Notably, the oil company YPF and the national mint will remain state-owned, while other entities will undergo partial privatization. 

While the bill was being debated, protesters gathered outside Congress in opposition to Milei's reforms. The protests led to clashes with riot police, as protesters threw rocks at the neoclassical building and the police responded with tear gas and rubber bullets. More than 20 journalists were injured by projectiles, and at least eight demonstrators were arrested. Seven police officers were also injured, according to government sources. 

After the vote, Milei said that the opposition leaders who supported his reforms "understood the historical context and chose to end the privileges of the caste and the corporate republic, in favor of the people, who have been impoverished and are hungry."

The approval of the bill comes after the International Monetary Fund (IMF) approved on Wednesday a $4.7 billion disbursement for Argentina—the fund's largest debtor. "So far, we have seen a good economic team in place, looking at ways in which the country can move out of this difficulty," the IMF's managing director, Kristalina Georgieva. 

The approval of the omnibus bill and the IMF disbursement are good news for Milei's administration. But it is still too early to celebrate. The omnibus bill will now have to clear its next obstacle: its approval in the Senate, where Milei's party has only 10 percent of the seats.