Business leaders on alert over Milei’s deregulation and state reform agenda

Execs want to know whether sector benefits will be kept in the ‘omnibus’ bill Javier Milei is preparing to send to Congress

It’s a frantic time in the business world. Leaders and representatives from various sectors are trying to develop contacts with officials from President-elect Javier Milei’s La Libertad Avanza coalition to learn the details of their plan of “deregulation and state reform.”

Milei’s big legislative bet — known as the “omnibus” bill because it consists of a group of measures in one legal package — challenges special regimes that apply to particular sectors, such as Tierra del Fuego manufacturing, the auto industry, and the knowledge economy.

There is also uncertainty in the industry about incentive programs and interest rate subsidies. Sources close to the president-elect acknowledge that the development of his legal project is “dynamic” and conversations are ongoing.

The document, which Federico Sturzenegger and his team have written over the past few months and delivered to the president-elect, currently runs to 1,500-plus pages. One economist with access to the document described it as “a big normative digest.” The plan designed by the former head of the Central Bank is the base of the “omnibus” bill. It will enter Congress in the coming days and aims to bring about profound changes in Argentina’s economic, social and political order.

Phones are ringing off the hook. No-one is giving away any details. The text is being kept under lock and key, and has been modified several times in recent weeks. There’s barely a hint of its contents. In Congress, legislators are expecting a “Dromi law,” as the sweeping 1989 privatization law was known, and are gearing up for a long discussion. Companies want to know what it’s about and, above all, what will happen with the promotion regimes for specific sectors.

These include tax benefits for manufacturers in Tierra del Fuego, auto industry bonds for the development of auto parts and motorcycles, and bonds for capital goods makers. There is also the knowledge economy bill, which many regard as state policy since it dates back to 2004 and has existed, with modifications, through various governments of different stripes.

The Herald’s sister publication Ámbito has learned the initial project aims to eliminate nearly 3,000 regulations, including several of the aforementioned regimes. Business sources say they had dealings over the weekend that resulted in modifications to the original plan, so some of the benefits may be reduced instead of eliminated, but there are no precise details on the final impact.

A senior La Libertad Avanza source acknowledged that there had been changes to the original plan and that “the discussion remains open.” Still, they confirmed that the predominant wish within the party is to end these kinds of programs. They say that “with a stable macroeconomic scenario there will be no need for sectorial incentives.”

Industrial policy as a whole will clearly be up for debate in the coming days. Some of the tools currently being used include the public banks’ interest rate subsidies, the Central Bank’s rule establishing different lines for productive investment and working capital, the tariff structures — such as the Draw Back import duty reimbursement scheme — and the administration of trade.

On this last issue, future Foreign Minister Diana Mondino said last Thursday at the Argentine Industrial Union conference: “The 10,200 non-automatic licenses have to disappear.” Reactions among business leaders at the 29th annual conference were mixed. Lukewarm. There were more murmurs than applause. Many manufacturers understand that an abrupt opening of the economy could be prejudicial to their companies’ health.

In the hallways of the Buenos Aires Convention Center, which hosted the industrialists’ meeting, there was a lot of talk about payments abroad. Despite criticism of the coverage provided by the Central Bank, commercial debt has grown by more than US$20 billion in recent months, while the total LEDIV debt is less than US$5 billion.

Companies are worried. Many claim they are about to run out of inputs and do not know when or how they will pay their suppliers. At present, this is the sector’s leading uncertainty. Milei’s team prefer not to give away any details about how they will solve this problem.

Originally published in / Translated by Agustín Mango


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