Government Removes Key Fiscal Section, Easing Passage of Bill
Argentina’s bond, currency, and stock markets experienced slight declines on Monday, while managing to avoid a significant slide. The dip occurred after the government made the decision to withdraw a vital fiscal section from its expansive “omnibus” bill, which aims to reform the country’s beleaguered economy. President Javier Milei, known for his libertarian views, agreed to eliminate proposed changes to taxation and pensions in an effort to facilitate the approval process in Congress. While this may make the bill easier to pass, it also means that crucial reforms aimed at reducing spending and increasing state revenues to achieve a zero-deficit target may be lost.
The exclusion of the fiscal package, however, increases the likelihood of Congress approving the “Omnibus Law.” Portfolio Personal Investments emphasized this point in a note, suggesting that the impact on markets should be limited as long as the bill continues to progress. Argentina’s S&P Merval stock index fell by over 1% on Monday, primarily influenced by declines in the energy and financial sectors. Additionally, sovereign bonds experienced an average slide of 1.1%. Local settlement and clearing agent, Puente, highlighted the ongoing political developments as Congress proceeds with extraordinary sessions and the potential for announcements. The omnibus bill is scheduled for discussion on Tuesday.
Since assuming office in January, Milei has been committed to revitalizing the country from its severe economic crises through stringent austerity measures and cost-cutting initiatives. However, he now faces significant challenges from opposition lawmakers and street protests.