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Argentina’s senate has dealt a blow to libertarian President Javier Milei’s campaign to balance the country’s budget by overwhelmingly approving an increase to pension spending.
Senators voted 61-8 on Thursday in favour of a new formula for calculating pensions, updating them to more fully account for Argentina’s triple-digit inflation.
Milei has vowed to veto the bill, though the wide margin of support it received in both the lower and upper chambers of congress means legislators would likely be able to reach the two-thirds majority needed to override that.
The vote is a disappointment for Milei, who was elected last year on a pledge to eliminate Argentina’s chronic fiscal deficit and bring down inflation. He racked up a primary fiscal surplus of 1.1 per cent of GDP in the first half of this year by making big cuts to social spending, public works and funding for Argentina’s provinces.
The new pension formula would increase costs for this year by 0.44 per cent of GDP, according to estimates by the congressional budget office.
“Investors see a government that wants to move things in the right direction but a lot of uncertainty about its political and management abilities,” said Martín Rapetti, director of consultancy Equilibra.
Milei’s La Libertad Avanza coalition controls just seven out of 72 senate seats. All but one senator from its closest ally, the rightwing Pro party, voted with the opposition.
The defeat comes a day after the government overwhelmingly lost a vote in the lower house on its plan to increase spending for the intelligence services.
The senate defeat had a negative impact on Argentina’s asset prices on Thursday, with some sovereign bonds and stocks falling 3 per cent to 4 per cent, said Fernando Marull, head of financial consultancy FMyA.
Earlier on Thursday, Milei shared a message on X by government press secretary Javier Lanari saying: “Fiscal balance is the backbone of the economic programme. Any attack against that will be vetoed.”
Juan Cruz Díaz, co-founder of the Cefeidas group political consultancy, said the government would probably try to negotiate with legislators to stop them from overriding any veto.
Milei’s relationship with lawmakers has been tense since he took office in December, when he skipped the traditional presidential address to congress in favour of a speech to crowds outside the building.
He has often referred to critical legislators as “enemies” and “traitors”, though he toned down such criticism after congress approved a scaled-back version of his economic reform bill in June.
“As we get closer to midterm elections [in late 2025], these tensions [may] accelerate, and we may see more situations like this,” said Cruz Díaz.
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