Between Economic Urgency and Electoral Calculation: Milei Accelerates Reforms in Congress While Embracing PASO Suspension

President Javier Milei's administration is navigating a delicate balance between urgent economic reforms and strategic electoral maneuvering. The government aims to fast-track key economic legislation through Congress in August, recognizing that the upcoming election campaign will soon overshadow legislative negotiations. This push includes significant projects such as modifying the "Innocence Fiscal" law, limiting cold zones, a new land law emphasizing private property rights, and a deregulation package.

The economic landscape presents challenges, with recent data showing an unexpected monthly activity decline. This has led to market speculation about future currency devaluation, prompting government intervention in futures markets to maintain exchange rate stability. Despite a recent debt rating upgrade by Moody's, Economy Minister Luis Caputo is hesitant to access international markets, opting instead for domestic measures to assure investors of Argentina's ability to meet its significant debt obligations next year.

“

The expectation for now is decoupled from the market. Polls say Kicillof wins and the market says Milei wins. If you see what the polls show, people shouldn't have Argentine bonds.

Politically, the administration is keenly aware of the electoral calendar. With presidential elections still some time away, current polling shows a tight race, particularly between Milei's party and the incumbent governor Axel Kicillof. This electoral parity has intensified the government's focus on eliminating the mandatory primary elections, known as PASO. While a complete elimination might be unlikely, there is a push for a one-time suspension, a strategy previously employed.

This political calculus extends to negotiations with opposition governors. Some are open to suspending the PASO, provided the government also advances other initiatives like the "Ficha Limpia" law. The administration, though possessing limited bargaining chips, is leveraging recent provincial agreements, such as the transfer of a key national highway to Santa Fe province, to demonstrate its capacity to deliver tangible benefits and rebuild political momentum after a period of governmental crisis.

“

green shoots