President Javier Milei faced a significant challenge in Congress, narrowly escaping a major defeat as lawmakers worked to gather sufficient votes to partially overturn his veto of a pension spending bill. On Wednesday night, the lower house of Congress cast a vote of 160-83 to reject the veto, falling just short of the two-thirds threshold required. An override would have necessitated a Senate vote as well. The legislation that Milei vetoed aimed to increase pension payments, a move that could have jeopardized the budget surplus cherished by the libertarian administration and its investors.
Earlier on Wednesday, Argentina’s sovereign bonds experienced a decline following the successful rejection by lawmakers of Milei’s veto concerning legislation aimed at increasing financial aid for the disabled. The inability to reverse the pension bill may provide temporary relief to investors, yet the narrow margin of the vote highlights the fraught political atmosphere surrounding Milei as the October midterm elections approach. XP Investimentos analyst Sol Azcune stated in a report to investors, “This victory provides the government with some breathing space after recent setbacks and strengthens its position regarding fiscal consolidation commitments.”
Milei’s administration has projected that the expenditures put forth by Congress in recent months account for approximately 2.5 percent of the gross domestic product. The proposed expenditure poses a risk to the primary budget surplus that was secured following significant spending reductions implemented during the libertarian president’s initial year and a half in office. The congressional vote provided Milei with a brief reprieve following a challenging week. On Wednesday, newly released figures indicated that the economy contracted more than anticipated in June, representing the fourth consecutive monthly decline in activity this year.
The president finds himself in a stand-off with Argentina’s major banks regarding the stricter regulations his administration put in place to address a peso sell-off that occurred in July. Milei’s party aims to capture over 40 percent of the midterm vote, given that he currently holds less than 15 percent of congressional seats. This move is intended to demonstrate to investors that his market-friendly reforms are viable in the long term. In a pivotal moment for both the President and his opponents, Wednesday’s closely contested legislative showdown is expected to serve as a crucial element in their appeals to voters, as each side seeks to bolster their influence in the legislature.