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In initial win for Argentine President Milei, senators approve his key bills after violent protests

BUENOS AIRES, Argentina (AP) — Argentina’s Senate narrowly approved key state overhaul and tax bills proposed by President Javier Miliei, delivering an initial legislative victory to the libertarian leader in his efforts to enact his promises of radi
Anti-government protesters clash with police outside Congress, as lawmakers debate a reform bill promoted by Argentine President Javier Milei in Buenos Aires, Argentina, Wednesday, June 12, 2024. (AP Photo/Gustavo Garello)

BUENOS AIRES, Argentina (AP) — Argentina’s Senate narrowly approved key state overhaul and tax bills proposed by President Javier Miliei, delivering an initial legislative victory to the libertarian leader in his efforts to enact 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 while protesters — urging lawmakers to reject Milei's harsh austerity plan — clashed with police outside Congress. The Senators still must approve individual measures in an article-by-article vote set to stretch throughout the night.

In a reflection of the fierce backlash to the legislation and deep polarization gripping Argentina's Congress, Vice President and head of the Senate Victoria Villarruel cast the tiebreaking vote in favor 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 privatize 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 his first legislative win 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 sprayed water cannons, pepper spray and tear gas to disperse the huge crowds. Demonstrators poured gasoline on two cars and set them alight, turning the central square into a smoke-filled battlefield. Authorities reported least 20 police officers injured and more than a dozen protesters arrested over the violence.

Milei rose to power on promises he would resolve Argentina’s worst economic crisis in two decades. 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.

“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.”

Senators approved two bills late Wednesday, a tax package and a 238-article state reform bill that passed the lower house of Congress in late April. Months of negotiations watered down the initial far-ranging proposal, which had over 600 articles.

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.

That desperation was clear in some of the Senators' closing speeches.

“How can I not give a president a tool that he needs in order to function?" said Luis Juez, senator from the right-wing PRO party, a loose ally of Milei's. “We voted so that this doesn't fail, because if things go badly for Milei, they go badly for everyone.”

Milei's legislation has faced the stiffest pushback from the left-leaning Peronist movement loyal to former president Cristina Fernández de Kirchner, which has dominated Argentine politics for the last two decades and holds sway over the country’s powerful trade unions.

Bankers, teachers, truckers and thousands of workers from 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 labor and pension rights,” said 54-year-old teacher Miriam Rajovitcher protesting ahead of the vote 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, driving inflation toward 300%. “I am so much worse off."

The presidency condemned protesters as “terrorists” and accused them of “attempting to carry out a coup d’état” by disrupting the Congress session.

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 producing a 36-36 tie.

Analysts say that foreign investors and the International Monetary Fund, to which Argentina owes a staggering $44 billion, have been closely watching Wednesday’s vote to see whether Milei can build consensus with his opponents.

“Everyone is in a wait-and-see mode. Investors say, 'Yes, we love what you're saying, but we need to see that this is sustainable,” said Marcelo J. García, Americas director at geopolitical risk firm Horizon Engage.

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 that offers foreign investors lucrative tax breaks for 30 years, no import tariffs on machinery and other perks for big corporations that critics say go too far in neglecting local industry.

“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 privatize some state-owned firms.

Backlash to the tax bill in particular has centered on an amnesty that would allow Argentines to register undeclared assets at home and abroad without paying hefty taxes, as well as a lower income tax threshold that would force more workers to pay taxes.

Frustrated by legislative resistance, Milei has increasingly moderated his previous all-or-nothing approach. Earlier this month, in a bid to break the impasse, Milei fired his inexperienced Cabinet chief and replaced him with Interior Minister Guillermo Francos, a career politician skilled at congressional wheeling and dealing.

Over the past month, political tensions have mounted, casting doubt over Milei's governability and injecting uncertainty into the Argentine economy.

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%. 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 the libertarian's agenda and released tranches of frozen loans, the fund has held back from handing Argentina fresh cash that Milei says he needs to lift currency controls.

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 García. “The market is saying, ‘Show me that you can govern.’”

Isabel Debre, The Associated Press