Protesters and police collide after Argentine president’s spending cut passes Senate

Argentina President Javier Milei’s proposal to cut state spending and strengthen his power was barely approved on June 13 by the Senate. Thousands of protesters gathered outside Congress, and federal security pushed back with tear gas and water cannons.

First Look

Argentina’s Senate narrowly approved President Javier Milei’s sweeping proposals to slash state spending and boost his own powers on June 13, handing the libertarian leader a much-needed first legislative victory.

Mr. Milei hailed the vote as a “triumph” even as opposition senators scrapped an income tax package and tweaked some contentious elements after an hourslong debate marred by violent clashes between police and protesters in downtown Buenos Aires.

Senate president Victoria Villarruel, the vice president, used a tiebreaking vote to give provisional approval to Mr. Milei’s plans to trim the fiscal deficit, incentivize foreign investment, and privatize some state-owned companies in a bid to transform the bloated Argentine state and overhaul its long-troubled economy.

The most critical parts of Mr. Milei’s legislation went on to pass a marathon article-by-article voting session that stretched into the morning of June 13.

His party made some tough concessions, agreeing not to sell off Argentina’s flagship airline Aerolíneas Argentinas, post office, or public media company, leaving just a handful of state-owned firms, such as Argentina’s nuclear power company, on the block for possible privatization. A measure lowering the income tax threshold to include thousands more workers also failed to pass the second round of Senate voting, complicating Mr. Milei’s fiscal consolidation plans.

The Senate’s changes to the state overhaul bill now face a final vote in the lower house. But after months of legislative pushback, it’s likely that the version approved by senators will become law.

As senators clashed over the bill inside Congress on June 12, thousands of protesters poured into the streets outside, burning cars and throwing Molotov cocktails as hundreds of federal security forces pushed back with rounds of tear gas and water cannons.

The passage gave a major boost to Mr. Milei, a populist outsider who rode to power stridently attacking the establishment but has found it impossible to enact deep reforms without making compromises in Argentina’s opposition-dominated Congress. Mr. Milei’s three-year-old party, Liberty Advances, holds just 15% of seats in the lower house and 10% of the Senate.

“Tonight is a triumph for the Argentine people and the first step toward the recovery of our greatness,” Mr. Milei posted on X, formerly Twitter, calling his bills “the most ambitious legislative reform of the last 40 years.”

As the sole leader since Argentina’s return to democracy in 1983 not to pass a law within his first six months as president, Mr. Milei has struggled to break the legislative impasse that has raised doubts about his governability and unnerved investors otherwise enthused by his libertarian agenda.

Analysts said the bill’s advance was enough, at least in the short term, to reassure jittery markets that Mr. Milei’s agenda has enough supporters to survive Argentina’s mounting political chaos and social unrest. Argentina sovereign bond yields jumped on news of the approval on June 13.

But the opposition has vowed to keep fighting and the plans passed with a razor-thin majority remain riddled with uncertainties.

“The Milei government showed it’s in a political learning curve, which is positive for investors and markets whose main concern is how much of his reform promises will materialize,” said Marcelo J. García, Americas director at geopolitical risk firm Horizon Engage. “But he’ll need to engage in issue-by-issue dialogue to implement at least part of his reform agenda.”

For nearly 21 hours, lawmakers haggled over the 238-article state reform bill, unpicking some parts but passing Mr. Milei’s highly divisive declaration of a one-year state of emergency and delegation of broad powers to the president in energy, pensions, security, and other matters until the end of his term in 2027.

In a reflection of the governing party’s weakness, Ms. Villarruel again used a casting vote to approve Mr. Milei’s expanded powers after a 35-35 tie.

Other articles seen as controversial that passed include an incentive scheme that would give investors lucrative tax breaks for 30 years.

His vision marks a stark reversal from that of the left-leaning Peronist movement, aligned with former leftist president Cristina Fernández de Kirchner, which has run vast budget deficits financed by printing money for much of the last two decades.

The spending cuts and currency devaluation that Mr. Milei has delivered have, at least in the short term, hit the populace hard – exacerbating a recession, increasing poverty to 55%, and driving annual inflation toward 300%, among the highest in the world.

The pain has tested the patience of ordinary Argentines still waiting to see the promised benefits of his reforms, including stable currency, tamer inflation, and fresh foreign investment.

This story was reported by The Associated Press.