President Javier Milei has blocked a law passed by Congress that would have distributed more funding to Argentina’s provinces, striking a note of tension in a week in which he has sought dialogue with provincial governors. 

Milei’s veto argues that the funding, known as National Treasury Contributions, differs from other federal tax funds that are shared automatically with Argentina’s provinces because they are designed for distribution at the national government’s discretion. They have been used in the past to fund the COVID-19 pandemic response, droughts, and other emergencies.

The veto was published in Argentina’s Official Gazette on Friday morning and bears Milei’s signature, alongside those of the cabinet.

Congress may now seek to overturn the veto, which would require a majority of two thirds in both upper and lower houses. Lawmakers recently managed to overturn a veto on funding for the disability sector, the first time in over two decades that a veto had been rejected.

“The existence of this fund is essential, because it gives the NATIONAL STATE a tool that complements the automatic tax sharing regime, destined to preserve federal balance in the face of exceptional contingencies,” the veto text read.

Allowing Argentina’s national government to administer the funds at its discretion, it said, “is not down to capricious and unjustified legislative design, but to a structural necessity of Argentine federalism.”

The law passed by Congress project would have distributed national treasury contributions automatically, following the same proportions as the general federal tax sharing arrangements. 

The veto comes five days after Milei suffered a crushing defeat to Peronism in the Buenos Aires Province legislative elections. Crunching the numbers revealed that many towns and districts had voted for the same party their local mayor belonged to. Analysts say this demonstrates the importance of parties having a strong local presence — something Milei has always lacked.

The day after the elections, Milei’s spokesman, Manuel Adorni, announced that the president had instructed Chief of Staff Guillermo Francos to call a discussion table with Argentina’s governors.

On Wednesday, Milei appointed Lisandro Catalán as Interior Minister, a role that traditionally involves working with Argentina’s provincial governors, and which had been eliminated after Francos became Chief of Staff in May, 2024. 

Federal funding for Argentina’s provinces has been a constant source of conflict throughout the Milei administration, with cuts to provincial funding announced as soon as the government took office. This has sparked battles between Milei and various provincial leaders: in February 2024, Chubut’s governor, Ignacio Torres, threatened to cut off oil and gas flow to the rest of the country unless Milei restored federal tax funding. 

The previous month, he had traded barbs with La Rioja Governor Ricardo Quintela, saying that if he was worried about funding, he “shouldn’t organize so many music shows.”