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© Reuters. FILE PHOTO: Argentina’s President Javier Milei speaks, during the 54th annual meeting of the World Economic Forum, in Davos, Switzerland, January 17, 2024. REUTERS/Denis Balibouse
By Walter Bianchi
BUENOS AIRES (Reuters) – Argentina’s government is confident that its extensive economic reform bill, known as the “omnibus bill”, will be approved in Congress after making concessions to remove some controversial sections from the legislation.
The bill is a key component of libertarian President Javier Milei’s plan to revamp Argentina’s struggling economy, burdened by high debt, staggering inflation, and numerous capital controls to protect the peso.
“There should now be no obstacle for the law to be approved,” presidential spokesman Manuel Adorni said in a daily press conference on Tuesday. “We expect it to be approved, with the first half of that happening this week.”
Milei, who took office in December after a polarizing campaign, has promised a “chainsaw” plan to reduce the size of the state and implement austerity measures to address the country’s financial instability.
While well-received by markets and investors, including the International Monetary Fund (IMF), Milei has cautioned that regular Argentines may face challenging times ahead, with an anticipated economic downturn this year.
The omnibus bill, a major part of Milei’s reform agenda, is set to be discussed in the lower house of Congress on Wednesday after the government removed the crucial fiscal section due to opposition to tax increases and pension reforms.
Although a significant concession by the government, which still plans to pursue those fiscal measures separately, this move is likely to prevent the bill from failing in Congress, where Milei only has minority support.
As a result, the S&P Merval stock index inched up 1% on Tuesday and sovereign bonds saw a slight increase on average.
The government still faces a major challenge in adhering to promises of achieving zero deficit this year, while also addressing an anticipated economic contraction estimated at 2.8% by the IMF.
“As soon as reality and the situation allow, we are going to reverse this decline,” Adorni added.
In the popular parallel currency markets, where people pay a significant premium for dollars to bypass strict capital controls, the exchange rate was over 1,200 pesos per dollar on Tuesday, far from the 826 peso controlled official rate.
In futures markets, the dollar was trading at 1,273 pesos by the end of June, reflecting expectations of a sharp decline.