Argentina's libertarian president, Javier Milei, just suffered a huge setback to his planned economic reforms to pull the country out of its economic crisis as the Argentinian Senate just rejected them. The reforms were described as "extreme" austerity measures that cut back on government spending, including cutting back on research and much-needed food aid for the poorest in the country.

As Reuters noted, while Milei won in the presidential elections, he remains to be an outsider in politics, with his party being the minority in Congress. The Senate's rejection of his proposed reforms was considered a major blow to him despite the recent slowing down of Argentina's inflation rate, which is still considered the highest in the world.

The Milei decree was rejected in a vote of 42-25, with four abstentions. However, it could not be rejected yet as Argentina's lower house has yet to reject it too. This still does not bode well for Milei's planned reforms as he not only has the minority in the Senate but also the Lower House.

This is Milei's latest legislative defeat, as the right-wing president's separate proposed package of sweeping reforms was also rejected by Congress last month. One opposition senator, Martin Lousteau, explained his vote against the decree on Thursday, saying that it was "very simple: It is unconstitutional."

Mileu's moves since taking office included devaluing the Argentinian peso by over 50% to address the country's fiscal and trade imbalances. Economically, this is beginning to work. However, it also caused the price of goods to rise as inflation surged to 276% last month. His moves also caused poverty levers to rise to 57% of the population.

Javier Milei Economic Reforms Defeat in Congress Places Argentina President in 'Weaker Position'

The rejection of his proposed economic reforms is also seen to affect Milei's power as president as it places him in "a much weaker position" politically, according to the Financial Times.

READ MORE: Argentina Inflation Slows Down Further Amid Javier Milei Austerity Measures

The rejection of his economic reforms, which contain articles aiming to privatize state companies, expand presidential powers, and replace the system for calculating pension increases, came after the Milei administration tried to negotiate with Argentina's powerful 23 provincial governors.

These officials hold sway over their state's lawmakers, but the negotiations ultimately did not help Milei as the governors are "feeling more empowered" going into those negotiations. The rejection also exposed Milei's political weakness, which his opponents have now begun to exploit.

Economist Says Argentina Must Dollarize and Get Rid of Central Bank

Argentina is Latin America's third-largest economy. However, its recent economic woes have led to the country's rapidly deteriorating purchasing power of its citizens. An economist thinks he has a solution.

Steve Hanke, professor of applied economics at Johns Hopkins University, spoke with CNBC and offered a solution, and that is for Milei to stick to his campaign promises to dollarize and get rid of the central bank.

"If they dollarized the economy and got rid of the central bank - something that Milei promised during his campaign, the thing would be fixed," the veteran economist told CNBC. "We wouldn't be talking about this, and they wouldn't have defaulted over and over again if they would have dollarized way back in 1999. But at any rate, it looks like Milei has put the dollarization thing on the shelf and I think that will end Milei. This is a fatal mistake."

READ MORE: Argentina Rightwing President Javier Milei Hugs Man He Called a 'Filthy Leftist,' Pope Francis

This article is owned by Latin Post.

Written by: Rick Martin

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