Argentina Senate deals blow to Milei's economic decree. Here’s what happened

Argentina's Senate dealt a significant blow to President Javier Milei's ambitious economic agenda by rejecting his extensive "mega decree" of reforms, signalling a setback for his efforts to address the country's economic challenges.

Despite Milei's minority presence in Congress, his decree, encompassing over 600 articles and spanning from privatisations to labour reforms, failed to secure approval in the Senate, with a vote count of 42 against to 25 in favour, along with four abstentions.

The fate of the decree now hinges on the decision of Argentina's lower house, where Milei's party also holds a minority.

Milei's shock treatment approach, initiated shortly after assuming office in December, sought to tackle Argentina's entrenched economic issues head-on, including a drastic devaluation of the local peso by over 50 per cent.

While these measures aimed to address fiscal and trade imbalances, they also aggravated the hardships faced by the population.

Notably, the country witnessed an annual inflation rate of 276 per cent last month, coupled with poverty levels soaring to 57 per cent of the population, underscoring the profound socio-economic impact of Milei's policies.

Thursday's legislative defeat marks the second setback for Milei, following the previous month's rejection of a broader reform package.

Despite attempts to garner support through a trimmed-down version of the decree, which excludes the privatisation of YPF SA and introduces alterations to emergency powers and pension calculations, Milei's revised approach faces mounting opposition.

According to Bloomberg, the Senate's decision reflects a growing apprehension among lawmakers and investors regarding Milei's legislative strategy amid escalating economic turmoil.

Opposition lawmakers, particularly from the Peronist party, exerted pressure on Vice President Victoria Villarruel to expedite the vote on the decree since January, culminating in its rejection in the Senate.

Despite the government's condemnation of the rushed proceedings, citing concerns over unilateral decisions by certain political groups, the momentum against Milei's decree proved challenging.

With Milei's party holding a minority presence in both legislative chambers, the path forward for his economic reforms remains uncertain.

The unravelling of Milei's economic decree indicates the complexities of implementing radical reforms in Argentina's volatile political and economic landscape.

While Milei's unorthodox approach garnered attention for its audacity, the resistance from lawmakers and uncertainties surrounding its efficacy have heightened anxieties among investors and citizens alike.

(With inputs from Reuters and Bloomberg)