Argentina's president vetoes curbs on utility prices amid IMF talks

Argentinas President Mauricio Macri on Thursday vetoed a law placing curbs on prices of electricity, gas and water, citing a need for fiscal discipline.

The opposition-sponsored law, approved hours earlier by the Senate after heated debate, would have rolled back prices for public utilities to November levels, and linked future hikes to salary increases.

"The law is already vetoed," Macri's chief of cabinet Marcos Pena told reporters, describing the legislation as "irresponsible."

Macri argued the price cuts would cost $3.9 billion at a time when the government is trying to reign in a ballooning budget deficit and seeking financial aid from the International Monetary Fund.

With Macri making the unpopular decision to seek a loan from the International Monetary Fund, his government is seeking to show progress toward lowering the fiscal deficit from 3.9 percent of GDP in 2017 to its target of 2.7 percent this year and 2.2 percent in 2019.

The president went on national television late Wednesday to urge opposition senators not to approve the bill in order to avoid the veto.

However, the Senate approved the bill that would have rolled back electricity, gas and water prices to November 2017 levels.

The government has pushed for a removal of subsidies to prices almost a decade after they were frozen.

The veto, the fifth since he became president in December 2015, will likely deepen Macri's unpopularity and comes after a damaging currency run saw the Argentine peso lost 20 percent against the dollar and a decision to go to the IMF.

Macri will pay a political cost for the veto.

"He'll be seen as defending unpopular measures at a time where economic conditions have worsened," said Daniel Kerner of analysts Eurasia.

"His popularity has declined quite a bit, and this trend will likely continue in the coming months as inflation remains high and the next few months will see more of this."

Bitter debate

The bill was approved by 37 votes in favor with 12 against after 12 hours of sharp debate.

"We want them to review the tariff policy, which consists cynically in asking Argentines to carry their country on their shoulders, instead of asking government officials to bring back the money they have tucked away abroad," said Peronist Senator Anabela Sagasti, referring to offshore accounts held by government ministers.

"The opposition bloc knows that it cannot be implemented and recognizes that it doesn't matter, because it says it wants to send a message to the executive," said Senator Esteban Bullrich of Macri's Cambiemos coalition.

Bullrich's election in Buenos Aires province, the traditional electoral base of Peronism, in 2017 mid-term polls ahead of former president Cristina Kirchner, helped provide the political springboard for Macri's reformist agenda.

However, that agenda is now facing its stiffest test, with regular street protests against his decision to go to the IMF for help.

"Worsening economic conditions and needed policy adjustments will continue to undermine Macri's popularity, reducing his room for maneuver," said Eurasia's Kerner.

Opinion polls say as many as 75 percent of Argentinians oppose any agreement with the IMF, which many link to painful memories of past economic and social crisis, which culminated in 2001 with a sovereign debt default, for which many Argentinians blame the IMF.

More than a decade ago, Argentina paid off its last IMF loan and severed relations with the fund.