Argentina's Milei vetoes pension reform to push through austerity | Business news

The Senate defied the president by approving a pension increase that took into account the country's triple-digit inflation rate.

Argentina's President Javier Milei is expected to veto a pension reform bill passed by the Senate, a move likely to deepen the rift between the libertarian politician and the opposition-controlled Congress.

The Senate opposed Milei's attempt to push through a pension spending increase in line with the country's triple-digit inflation, dealing a blow to his tough austerity program.

The bill, which passed the lower house in June, was approved in the Senate on Thursday by a vote of 61 to 8. All but one of the lawmakers who voted against the bill belonged to Milei's party, a sign that the president's allies had failed to negotiate with the centrist parties.

The legislature could override his veto by re-passing the bill with a two-thirds majority.

“[The bill’s] “The only goal was to destroy the government's economic program,” Milei's office said in a statement on X, as this would have required additional spending of 1.2 percent of gross domestic product (GDP).

“The president has promised the Argentines that he will maintain a budget surplus at all costs, and he will,” his office said.

Milei took office in December with strict austerity measures to combat rampant inflation in the face of rising poverty, which now affects half the population.

He has promised to overturn laws that undermine his “zero deficit” plan.

“Anything that violates the public accounts will be vetoed,” presidential spokesman Manuel Adorni said on Thursday.

The crushing defeat for the president has once again highlighted his weakness in Congress, where left-wing and centrist lawmakers hold the reins.

Since Milei's party has less than 15 percent of the seats in Congress and only seven of the 72 seats in the Senate, he has relied largely on comprehensive presidential decrees to cut government spending and deregulate the economy.

Last week, Congress repealed a presidential order that would have multiplied the intelligence budget, arguing that the funds could be used for more pressing social needs.

Protests against Milei’s agenda

After six months in office, Milei won his first victory in parliament in June when his economic reform bill narrowly passed the Senate despite clashes between thousands of protesters and police.

But the pension law, which will increase pensions by more than 8 percent this year, threatens to revive investor fears about the ability of the self-proclaimed “anarcho-capitalist” to implement his radical agenda.

In the first six months of the year, Milei managed to achieve an extremely rare budget surplus by drastically cutting government spending, halting public construction projects and reducing revenue transfers to the provinces.

“The pension reform passed today is particularly sensitive because it partly goes to the core of Milei's budget program,” said Marcelo J. Garcia, director for the Americas at Horizon Engage, a New York-based political risk consultancy.

“What worries investors most is the fact that this negative trend is due to the hard, more confrontational side of Milei's inner circle taking the lead.”

The executive measures imposed so far have deepened the recession, increased poverty to 55 percent and pushed annual inflation up to 260 percent.