Argentina General Discussion: Shock Therapy

There are beginning to be some positive signs from the economy: most notably, inflation has continued its steady decline and is expected to reach single digits this month. At the same time, Argentine bonds have risen meteorically and the BCRA has managed to go from a negative balance sheet measured in the tens of billions to holding reserves of around ten billion $USD. The rapid fall in inflation combined with the first quarterly Argentine budget surplus since the commodity boom left the central bank room to cut interest rates, thereby reducing debt expenses and improving their balance sheet even more. The removal of export restrictions led to the greatest month for meat exports since the 60s, one of the few industries expanding despite the severe recession hitting the rest of the economy. The removal of ghost recipients and corrupt intermediaries left enough money to increase the per-child subsidy by 500%. Perhaps most importantly of all, Milei finally seems to have won over enough deputies to get his huge "Ley de Bases" Omnibus bill through the lower house.

Milei's initial attempt to push through the Omnibill crashed after irreconcilable differences emerged between Milei and the governors over the distribution of tax funds. Specifically, a dispute arose regarding "Impuesto PAIS", a tax on the use of foreign currency initially intended to deter dollar use that wound up as one of the single biggest revenue generators for the Argentine government. Naturally the governors wanted a cut of that revenue written into law in exchange for their support on the rest of the bill. But Milei has said that he wants to abolish the tax as soon as possible, something that would be far more difficult, verging on impossible if it were to be tied in with the byzantine system of coparticipación. Both sides have been playing hardball up until recently: Milei by withholding discretionary transfers and the governors by withholding legislative support and by voting to repeal the DNU in the Senate. Yet after months of negotiations Milei seems to have a majority in the Chamber of Deputies to push through a modified version of the Omnibill:

* Governor Osvaldo Jaldo of Tucumán has decided to be the Model Mileista among the governors: flying coach, firing government workers, slashing spending, carving a new bloc out of the Peronist legislative bench that fully backed the Omnibill and even standing as the lone governor to support Milei during a debt dispute with Nacho Torres, the newly elected PRO governor of Chubut.

* The governors and legislators answering to PRO plus the Radical governors and the independent Peronists who answer to Schiaretti have been generally supportive, though not uncritically so. Nevertheless, they're expected to back nearly every article of the bill.

* The provincial parties pretty much entirely vote according to their own interests but are reportedly going to vote in favour of the bill as a whole but against several specific provisions, with the independent Peronists answering to Llaryora to vote against more articles than those answering to Schiaretti but in favour of more than the independent socialists under Natalia de la Sota.

* Some of the northern UxP governors have been comparatively open to negotiations with Milei, specifically governor Zamora of Santiago del Estero and governor Jalil of Catamarca, the former privately and the latter publicly. There's some question as to whether their legislators would actually vote in favour explicitly or simply not show up to the vote so as to stay in the opposition bloc. Their support isn't needed for passage through the Deputies but it could be crucial to getting the Omnibill through the Senate, particularly since Zamora is the only governor in control of three rather than two Senate seats.

* A sizable portion of the Radical legislative bench and several notable retirees such as former President Alfonsín and former Jujuy governor Morales have been explicitly opposed to Milei, though not necessarily to the point of backing the Kirchnerists

* and of course the bulk of the UxP bloc is resolutely opposed to everything Milei does, most notably Buenos Aires governor Axel Kicillof (who can afford to be more confrontational since his province isn't dependent on transfer payments).

The bill is expected to pass in an extended marathon session (it's scheduled to last 30 straight hours and Milei has said he'll extend it for as long as necessary), though a close margin isn't out of a question since several of the legislators could wind up voting against their respective governors. While winning over one chamber would definitely represent a big win for Milei, the Senate will be a far tougher nut to crack if he can't flip at least a few more Peronist governors.

However, the opposition to Milei is still in a state of total disarray, with no clear leadership and multiple totally irreconcilable feuding factions. Naturally the biggest names are those tied with the former government like CFK and Kicillof, but they've gotten to be so despised over the years that their mere association with opposition only serves to benefit the government. For the time being it seems unlikely that they would actually unite to overturn his agenda anytime soon even if they won't support it either.

At the same time, Milei faces the exact opposite problem: he won on a hardline libertarian platform but the number of actual qualified libertarians in Argentina is nowhere near sufficient to fill positions in the government. Yet that hasn't stopped Milei from appointing:

* His 22 year old TikTok manager Iñaki Gutiérrez to run official government social media account

* His former social media manager Agustín Romo to the Buenos Aires legislature and as his representative to CPAC in Hungary

* His cosplaying former hairstylist Lilia Lemoine to Congress

As a result, his administration is a strange combination combination of inexperienced libertarian loyalists and old school Peronist operators like Daniel Scioli and the Menems. In that sense his administration is more similar to that of the Kirchners than Macri or Bolsonaro; where Macri trusted in the institutions and Bolsonaro relied on support from interest groups like the agricultural lobby or the military, Milei falls back on his personal connections, his friends, his family and his loyalists. He's openly expressed admiration for the political skills of both Peron and Cristina and unlike Macri has no problems whatsoever with using the executive powers established by the Peronists for his own ends. The most cutting critique I've seen of Milei's first six months is that he's replacing the Peronist caste with a new Mileista caste, a charge he doesn't help refute when he fills positions with his sister, his spokesman's cousin and the cousin of the President of the Chamber of Deputies. He's picked fights with the unions, the businessmen, the governors, both congressional chambers, the media, Brazil, China and Colombia. The only institution he hasn't gone against is the Supreme Court, and that's because they've largely gone along with his agenda. It's at least fair to say he has autocratic tendencies, though the counterargument would be that every major Argentine President since Peron has had autocratic tendencies and that the only way he could ever achieve his goals against so many entrenched interests is to be totally unyielding in the face of opposition.

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