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Explainer-What is in Javier Milei's sweeping Argentina reform bill?

Published 12/28/2023, 11:56 AM
Updated 12/29/2023, 09:41 AM
© Reuters. Argentine presidential candidate Javier Milei of La Libertad Avanza party speaks during the closing event of his electoral campaign ahead of the presidential election, in Buenos Aires, Argentina, October 18, 2023. REUTERS/Matias Baglietto/File Photo

By Lucinda Elliott and Jorgelina do Rosario

(Reuters) - Argentine President Javier Milei has sent a reform bill to Congress proposing far-reaching changes to the country's tax system, electoral law and public debt management.

The push to reshape South America's second-largest economy with an omnibus bill requires approval from lawmakers in both chambers of Congress, where Milei's coalition holds a small minority of seats.

WHAT ARE THE MAJOR REFORMS IN THE BILL?

The bill has 664 articles that range from allowing the privatization of 41 public companies, eliminating the presidential primary vote and introducing a broad 15% tax on most exports.

The government also proposed raising export taxes for soy and its derivatives to 33% from 31%. Argentina is the world's No. 1 exporter of processed soy.

The bill aims to introduce tax amnesties for Argentines, allowing them to register and repatriate some undeclared assets such as stocks, cryptocurrencies and cash.

A reform to public debt management would remove limits on sovereign bonds issued overseas and eliminate some conditions on restructuring debt.

Changes to Argentina's proportional representation electoral system would raise the number of lawmakers in each district to one per 161,000 inhabitants, from one per 180,000 inhabitants. This would give more power to the populous province of Buenos Aires in the lower house of Congress, according to a note to clients by consultancy firm 1816.

Among the more controversial reforms cited, is a call to cede some legislative power to the presidency until Dec. 31, 2025, with the option to extend these for a further two years.

WHAT ABOUT MILEI'S PRESIDENTIAL DECREE?

Markets cautiously welcomed a presidential decree from Milei last week to deregulate the economy, which came into effect on Dec.29 and also introduces wide-ranging reforms such as the end to export limits.

That decree must go before a legislative commission to weigh its constitutionality. It will remain in force unless both Congress and the Senate vote it down.

Unlike the reform bill, the presidential decree does not include changes to the tax and the electoral system, which must be put to congressional debate under Argentina's constitution.

HOW LONG COULD IT TAKE TO PASS THE REFORM BILL?

Milei's government sent the bill to Congress on Wednesday and has called for extraordinary sessions to fast-track its reform agenda.

The extraordinary sessions are scheduled through Jan. 31, shortening the usual recess until March. Lawmakers will set up commissions to analyze the proposals, which may include input from experts and government officials.

Several of the measures proposed require an absolute majority, such as electoral reform, which analysts warn could slow the process down. There is no set timeline stipulated for the bill to be debated.

HOW STRONG IS THE GOVERNMENT'S POSITION IN CONGRESS?

Milei's coalition, La Libertad Avanza, controls only 15% of seats in the lower house, so must rally support to move forward.

If eventually approved by the lower house, the bill moves to the Senate, where the government is even weaker, with less than 10% of seats.

Given his lack of a strong party or a majority in either chamber, analysts warn that Milei faces an uphill battle to advance his reform agenda.

© Reuters. Argentine presidential candidate Javier Milei of La Libertad Avanza party speaks during the closing event of his electoral campaign ahead of the presidential election, in Buenos Aires, Argentina, October 18, 2023. REUTERS/Matias Baglietto/File Photo

"My doubt is whether Milei is open to accepting changes, or whether he wants the bill to pass without accepting any amendments," said Ignacio Labaqui senior analyst at Medley Global Advisors in Buenos Aires. "If he goes for the second option, he is literally declaring war on the legislative branch and has a high chance of losing."

Opposition movements have organized demonstrations against Milei's agenda in several cities since he took office Dec. 10.

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