Revolutionary changes in Argentina’s economic legislation

Máximo Bomchil
Bomchil, Buenos Aires
maximo.bomchil@bomchil.com

On 10 December 2023, a new president was inaugurated in Argentina with a strong capitalistic and conservative profile. President Javier Milei believes in balanced state budgets, free international trade, insertion of the country in the Western world, private investment as a means of economic growth and social advancement and deregulation of the economy. To attain this, hundreds, if not thousands of laws, decrees and resolutions from scores of government agencies, will have to be either derogated or substantially amended.

The change, or at least the intention to change the legislation, has already started.

On 20 December 2023, the President issued an Executive Order of 366 articles derogating or amending several laws that hindered or restricted the free trade of goods and services including (1) the Supply and Service Law, which permitted the Government to control the supply, production and price of goods; (2) the National Buy and Argentine Buy laws, that gave preference to local production in the purchases of the state and state concessionaries; (3) the End Cap Law; (4) the Commercial Promotion Law; (5) the Wholesale Markets Law; and (6) several laws that restricted the sale of non-prescription medicines out of pharmacies, among many others. It also deeply deregulated industries which had become strongly regulated in the last years, such as the production of wine and sugar, issuance of credit and debit cards, insurance, mining, energy generation and distribution, labour law and commercial air navigation (open sky) among others. It eliminated all the restrictions on foreigners to purchase rural land and modified the Civil Code establishing that obligations in foreign currency must be honoured in the agreed currency and, unless agreed between the parties, may not be cancelled in local currency.

Furthermore, on 27 December 2024, the Executive sent to Congress a bill with 663 articles which radically purports to deregulate the economy in areas such as oil and gas and the fishing industry, to privatise most of the state companies, to update the antitrust legislation and the companies’ law, to introduce a promotional regime for investments in excess of US$200 million and to amend the wealth tax law to reduce the applicable rates which had become so confiscatory high that many entrepreneurs sought refuge by moving their fiscal residences to the neighbouring country of Uruguay which has a much friendlier tax regime.

This bill was rejected by Congress, but negotiations between the political parties that control Congress are under way and a new bill has been sent to the House of Representatives and will be dealt with in the next few weeks. This new bill, much reduced from the original, to satisfy the legislative majorities needed to be approved, still introduces major changes in the country’s economic legislation.

The Executive Order (EO) issued on 20 December 2023 has had more luck, up to now. According to the Federal Constitution, the Executive Power may issue executive orders of legislative character only when extraordinary circumstances impede the Congress to follow the procedures established by the Constitution to sanction laws. This clearly was not the case of the Executive Order issued on 20 December 2023, as there were no circumstances that prevented the Congress from meeting and following the constitutional procedures for the sanctioning of laws. The Executive Order is therefore unconstitutional.

However, according to the law which regulates the validity of executive orders, these remain in force unless the two chamber of Congress – Senate and House of Representatives – reject them. In fact, the Senate rejected the EO on 14 March 2024, but the probability that it is also rejected by the House of Representatives is very low, because the hard-core opposition to the Government does not have the votes necessary to do so.

Of course, the courts could rule that the EO or determined parts of it are unconstitutional and, in fact, they have done so, but with regard to the amendments introduced to labour legislation. The rest of its articles are, however, in full force, and it looks like that will have longevity.

The experience of the last few months has shown that the Argentinian Government faces an uphill struggle in trying to introduce structural economic reforms in the country. However, we lawyers had better start studying the impending legislation which our clients will have to abide by in the years to come.