Argentine Opposition Unites to Challenge Pension Reform
In a significant political development, the heterogeneous Argentine opposition has come together for the first time in Congress to challenge the government of President Javier Milei. Early Wednesday morning, the Chamber of Deputies approved a bill to replace the pension update formula decreed by Milei, with 162 positive votes, 72 negative, and eight abstentions. This bill, which must also be approved by the Senate before it can take effect, proposes an 8% increase in pensions—an action resisted by the government in the interest of maintaining fiscal balance.
Following the vote, President Milei expressed strong opposition on social media, stating, 'I will defend the box with a pure veto if necessary. They impoverished the country through pure deficit, so in no way am I going to allow this to be repeated.' National Deputy Martín Tetaz responded by noting that it would be difficult for the president to reject a law approved by two-thirds of the votes. According to the Argentine Constitution, if the president vetoes a bill, the Legislative Branch can hold another vote. If two-thirds of each chamber supports the law again, it becomes effective.
The political tension has reached its peak. The ruling party, La Libertad Avanza, holds a minority in the Senate with only seven of the 72 seats. Although the six Pro legislators who support former president Mauricio Macri stand with Milei, their numbers still fall short of the majority needed to prevent an adverse outcome. The alliance in the Lower House, primarily between the Radical Civic Union (UCR) and Peronism, may garner enough votes to pass the bill.
President Milei is currently leading a smear campaign against opposition politicians, accusing them of sabotaging his economic plans. He has even depicted them as 'rats' through an artificial intelligence-generated image. On social media platform X (formerly Twitter), Milei accused the opposition of trying to 'destroy the fiscal balance, leading to the loss of bond value and increased country risk and interest rates.'
The UCR's pension update formula comes with a fiscal cost of 0.43% of Argentine GDP, according to the Congressional Budget Office. If approved, it could impact Milei's fiscal surplus achieved by cutting pensions, salaries, and public works, but would offer some financial relief to older adults. Currently, the minimum pension in Argentina is about $225.00 at the official rate, plus an additional compensatory bonus of $80.00, totaling less than half of what retirees need for their basic living expenses.
Despite potential repercussions, Milei is steadfast in maintaining his economic policies, convinced that the public supports him. Milei remarked at the Latin American Economic Forum, 'Every time the fiscal degenerates of politics want to break the fiscal balance, I am going to veto everything.' He believes that if he fails to gain legislative support, the Argentine electorate will back him in the mid-term elections.
Senators will face immense pressure in the upcoming days, as the government strives to block the pension increase. Their primary goal is to secure the Upper House's approval of the State scrapping law, which has already passed in the Chamber of Deputies. The opposition's stance could severely affect public accounts if they approve the proposed reforms, especially those favoring large companies while increasing taxes on workers.
Economy Minister Luis Caputo attempted to reassure the markets with optimism, declaring that Argentina has moved from a deficit to a fiscal surplus, achieved a trade surplus, and reached single-digit inflation in April. However, the message did little to calm concerns, as the country's risk rating exceeded 1,500 points, and sovereign bonds continued to decline.
- The ruling party has indicated it will veto any pension updates promoted by the opposition if they are passed by Congress, citing the potential fiscal expense as a threat to the government's financial stability. Presidential spokesperson Manuel Adorni reiterated President Milei's stance on maintaining fiscal balance.
- The Treasury has yet to finalize the new pension update formula, but the government insists that any new scheme calculating the pension expenses will result in further fiscal strain. Chief of Staff Guillermo Francos emphasized that without available resources, it is unfeasible to increase pensions significantly.
- A government insider suggested that the pension update proposal would likely not pass through Congress, hinting that the opposition might be using the issue to politically damage the current administration. The administration has hinted that the pension update would require a calculation based on the INDEC Consumer Price Index, with an additional 8.1% to 12.5% from the Executive Decree, bringing the total increase to around 20.6%.
