On the evening of March 1st, President Javier Milei delivered an unprecedented speech in front of Congress, and for many reasons. For one thing, his office labeled the event as a ‘State of the Nation’ address, even though he was formally opening congressional sessions for the year. He also unveiled an ‘anti-caste’ law which would criminalize monetary emission and eliminate public financing for political parties. But most importantly, Milei announced his intention to sign a new national ‘pact’ on May 25th, on the 214th anniversary of the Revolución de Mayo that freed Argentina from Spain.

The Pacto de Mayo that Milei proposed includes commitments to: 1) the inviolability of private property; 2) non-negotiable balanced budgets; 3) the return to a level of 25% of government expenditures as a percent of GDP; 4) a tax reform that effectively reduces fiscal pressure; 5) a reform of the system of tax ‘coparticipation’, i.e. the federal tax revenue share scheme across provinces; 6) the exploitation of available natural resources; 7) the flexibilization of labor laws; 8) pension reform to allow for private pension funds; 9) political reform so as to eliminate public financing of political parties; and 10) free trade. 

Some of the Pacto de Mayo principles are, in theory, already embedded in Argentina’s constitution, such as the protection of private property, but most of them seem like basic goals for all liberal democracies. In fact, they are very similar to the 1989 Washington Consensus, also a set of economic policy prescriptions that mostly encouraged nations to embrace economic liberalism. 

Compared to John Williamson’s ten Washington Consensus points, Milei’s originality lies in stressing the need for pension reform, in a country where private savings were confiscated a few years ago while millions of government handouts disguised as pensions were given out in recent years at the expense of taxpayers. Another difference is Milei’s push for exploiting natural resources, especially when some provinces refuse to do so (La Rioja even banned lithium exploration) and rely instead on federal tax revenue. This is why the president is also insisting on reforming tax co-participation, as it allows for provinces to increase public spending while relying on the federal government to levy taxes. The one Pacto de Mayo principle that stands in direct contrast to one of the Washington Consensus’ is the call for tax cuts, as Williamson advocated for expanding the tax base. In the end, then, the Pacto de Mayo looks like an improved Washington Consensus. 

So who is to sign the Pacto de Mayo? Governors. And this is because Milei’s announcement is not just ideological, but also strategic. After his failure to have Congress pass the Ley Bases, an omnibus bill which included sweeping deregulation and which would have complemented his late 2023 megadecree, Milei knows that he will need to cooperate with subnational authorities if further reform is to be implemented. But kirchnerismo, the leftist movement Milei defeated in the polls a few months ago, rejects the Pacto de Mayo. His strategy, then, is to by-pass negotiations with parties or individual congresspeople and instead appeal to key governors. By offering fiscal relief to some of their provinces, the idea is governors will instruct legislators (as they usually work as their political bosses) to support government bills.

Besides the announcement of the Pacto de Mayo and the ‘anti-caste’ law, Milei also announced the elimination of Télam, a state news agency which was effectively a taxpayer-funded vehicle for leftist propaganda. For the most part, though, Milei’s speech was similar to the one he delivered for his inauguration. This time, he quoted Milton Friedman and referenced Friedrich Hayek’s Road to Serfdom.

The future of Milei’s Pacto de Mayo, as well as the rest of his agenda, is uncertain. Not only did his administration decide to send the Ley Bases back to the committee stage to prevent defeat, but his megadecree has also been challenged in the courts. Whether he can appeal to governors with his improved version of the Washington Consensus remains to be seen. But despite the dire economic situation, Milei is still popular and his Friday night speech marked an ideological comeback that energized his base. The president is not backtracking. Instead, he is accelerating.

 

Marcos Falcone is the Project Manager of Fundación Libertad and a regular contributor to Forbes Argentina. His writing has also appeared in The Washington Post, National Review, and Reason, among others. He is based in Buenos Aires, Argentina.