A Status Check on President Javier Milei's Policy Proposals

Milei was upfront in his inaugural address on December 10. “Our country demands action—and immediate action,” he said, saying that Argentina was at “the brink of its biggest crisis in history.” At that time, annual inflation stood at 161 percent with 45 percent of the population living in poverty. 

Milei’s first steps acted on his promise of shrinking the size of the state through internal reforms to the executive branch. Using an executive order, he slashed the number of ministries from 18 to nine and opted not to renew the contracts of thousands of public employees. 

Milei also announced a goal of reducing public-sector spending by 5 percent of GDP by the end of 2023, which he began to accomplish by cutting state fuel and transportation subsidies, putting a pause on tenders for public works, and eliminating regulatory rules. Economy Minister Luis Caputo announced that there would also be a 50 percent devaluation of the Argentine peso.

On December 20, 2023, Milei declared an economic emergency. A 1994 constitutional mechanism allows the president to bypass Congress and issue decrees to pass measures in the case of such an event. The decree that Milei promulgated is composed of 366 articles. Among its main tenets are steps to privatize Argentina’s state-owned companies. Another measure repeals laws that require congressional approval for privatization. Deregulation also features in the decree, with measures such as reducing regulations around credit cards, as well as abolishing restrictions on the provision of private healthcare. 

A portion of the measures deal with labor rights, including limits to severance pay and the number of days of maternity leave a mother can take before birth, and an elimination of penalties for companies that are found to have unregistered employees. Another measure allows companies to dismiss workers who partake in blockades during protests. That step is particularly notable, given large-scale union protests that have taken place against Milei’s government since he took office.

The president’s emergency decree went into effect on December 29, 2023. It will remain in effect unless both chambers of Congress vote to repeal it. If only one rejects it, it remains in place. However, part of the decree was struck down by a labor court on January 3. The court responded to a lawsuit presented by a national federation of unions that argued that the decree does not meet the standard of emergency necessary to bypass the legislature. Nicolás Saldías, senior analyst at the Economist Intelligence Unit, described the decision legal as “the first political defeat for Milei.”

The administration has appealed this decision, arguing the Labor Court lacks jurisdiction to rule on the decree. Both that lawsuit and other challenges to the decree are being considered by the Supreme Court. “The biggest risk for Milei’s agenda is in the courts,” Saldías explained. “That’s where the big challenges are going to be, especially with the decree.”

In Argentina, fiscal and electoral reforms cannot be enacted through decree and must be passed by Congress. So, as Milei’s decree was taking effect, he also introduced a package of reforms to the legislature. The omnibus bill consisted of 664 articles that seek to put Milei’s economic plans into action. That started with privatizing 41 public companies, like the national oil company, the national airline, and the national rail company.

The omnibus bill’s fiscal reforms also included a 15 percent tax on most exports and a 33 percent rate for soy products. It also contained measures that offer tax amnesties to encourage repatriating assets.

Political reforms included eliminating the presidential primary system known as the PASO and increasing the number of lawmakers in Congress. The bill also proposes declaring a one-year state of emergency that grants Milei powers otherwise delegated to the legislature.

Passing the omnibus bill through Congress presented hurdles for the Milei administration. Though he banked 56 percent of the vote in the 2023 presidential election, his party holds only 40 of the 257 seats in the Chamber of Deputies and seven of 72 seats in the Senate. The president’s party does not control any of the country’s 24 governorships. Argentine governors are influential figures and hold sway over their provinces’ representatives in Congress.

To pass his omnibus bill, Milei needed to net votes from legislators from other coalitions, such as members of the right-wing Together for Change. Some—but not all—of the parties in that coalition are allied with Milei’s party.

Through several days of debate in Congress, the bill was reduced by over half to almost 300 articles. Most of the articles related to fiscal reforms were removed, as were provisions curbing social protests, pension reform, and fishing regulations. “Milei has a narrative that is quite consistent with his campaign—that he doesn't want compromise with the political establishment,” said Díaz. However, he explained, “People from his government and even [Milei himself] were willing to have some concessions with governors and members of the other parties.”

What remained in the bill? Almost all of the privatization initiatives, measures that raise penalties for road-blocking protests, and a dismantling of environmental protections. 

On February 2, the lower house of Congress approved the bill in general terms with 144 legislators voting for it and 109 voting against.

During the debate in Congress, unions organized a general strike on January 24, directing tens of thousands to march in the street against the bill and Milei’s austerity measures. Businesses, lacking workers, were forced to shut down. This was the first general strike in Argentina since the presidency of Mauricio Macri (2015–2019). Saldías commented, “I don’t think the strike had much of an effect, but I do think it signals Milei will be facing a very firm resistance."

That resistance fomented in Congress where, after February 2, the lower house engaged in a line-by-line vote on each article of the bill. During this period, Milei's party negotiated with legislators and the governors over several measures. However, negotiations proved unsuccessful when several critical measures, including on energy, security, and the privatization of public companies, were rejected. Milei’s party withdrew the bill from consideration on February 6. This nullified the February 2 vote.

As of publication, it is not known if Milei plans to reintroduce his reforms into Congress. Milei’s party could propose another large-scale piece of legislation or cleave it into smaller bills.

The president, who was in Italy and Israel for most of the debate, lashed out against members of the opposition in Congress after the vote. He particularly criticized Argentina’s governors for their advocacy against the bill. As retribution, Milei cut a subsidy that the governors rely on to keep public transportation costs down. Saldías explained that attacking the governors could backfire. “The real axis where Milei’s agenda lies is his relationship with the governors,” he said. “By taking such a confrontational stance to the governors, he’s made his position even weaker in Congress, especially with centrist legislators.”

Milei’s approach may depend on dynamics within his electoral coalition and allies. Currently, he is trying to firm up his alliance with the PRO party, a member of the United for Change coalition helmed by two Milei allies, Security Minister Patricia Bullrich and former President Macri. An alliance with the PRO would double Milei’s representation in Congress though still leave him short of the numbers he would need to pass legislation. However, other members of the PRO party, such as former mayor of Buenos Aires Horacio Rodríguez Larreta, have been openly critical of Milei and could split from the party over such an alliance.

While Milei and his party decide if they want to reintroduce the omnibus legislation, Congress may also decide to vote on his decree, an action Saldías believes the Milei administration wants to avoid. “They are trying to delay that vote because they would lose,” he said. Saldías believes it likelier that a vote would first take place in the Senate. If it gets rejected there, “it would send a ripple effect and embolden the opposition in the lower house,” he said.

Outside of Congress, Milei has floated the idea of using a referendum—be it non-binding or binding—to pass his reforms. In the non-binding case, Milei could initiate the plebiscite, but its result would simply indicate to Congress how popular the measure is. A binding referendum, on the other hand, would have to be initiated by Congress and would become law if passed—an unlikely scenario.

“I think the president today is quite confident that he has the support of the people,” Díaz said. "He believes that if he takes these risks … and delivers some results on the economy, mostly around inflation, he can increase support.”