Argentina Senate Passes New Pension Formula in Defiance of Milei
(Bloomberg) -- Senators in Argentina approved a bill Thursday that defies President Javier Milei’s bid to balance the government’s books by reworking how pension payments are calculated.
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In a 61 to 8 general vote, senators passed the bill that already swept through the lower house in June. Ever since the June vote, Milei vowed to veto the bill — or slash spending if it were approved to compensate for the extra expenditure. Lawmakers could override a potential veto by passing the bill with two-thirds majorities again.
The episode risks rehashing investor concerns over Milei’s ability to push through more reforms with a legislature the libertarian often vilifies as the worst of Argentina’s political elitism. He toned down his remarks in June when lawmakers passed his reform package, which marked his biggest legislative win since taking office Dec. 10. But since then, a variety of issues have brought tensions back to the surface.
Analysts estimate the new inflation-adjusted pension formula would add the equivalent 0.45% of gross domestic product to public spending. That flies directly in the face of one of Milei’s chief commitments to reach a fiscal balance this year.
The libertarian leader has already made significant cuts to public works, social security and government jobs so far this year to reel in a deficit that economists widely see as the root problem behind Argentina’s notorious history of runaway inflation, currency crises and debt defaults.
Pensions and social security payments make up 46% of total government budget, according to official data. Any small change to the formula that create a big ripple effect on the government’s bid to achieve a fiscal balance, something that’s a rare occurrence in crisis-prone Argentina.
Tensions between Milei, senators and Vice President Victoria Villarruel were already running high this week. Senators tried to give themselves a pay hike to 9 million pesos ($9,500) a month, which Milei slammed as tone deaf since the average salary in Argentina is just 1 million pesos. Senators temporarily walked back the pay hike, though Villarruel, who also presides over the chamber, has defended the salary increases.
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