Argentina's Milei reopens ministry, restarts dialogue with opposition after electoral defeat

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BUENOS AIRES, Argentina (AP) — The administration of Argentina's President Javier Milei resurrected the country's interior ministry on Wednesday in a rare bid to build alliances with opposition governors days after his party lost by a landslide in a key provincial election.

But just hours after the radical libertarian appeared to prioritize his political needs over his cost-cutting crusade, Milei veoted an opposition-backed bill seeking to increase funds for cash-strapped public universities.

The veto, part of Milei's long-running strategy to block the opposition's social spending measures and defend his hard-won fiscal surplus, raised questions about his commitment to cross-aisle cooperation.

“The government is sending mixed signals,” wrote policy editor Maia Jastreblansky in the newspaper La Nación. “On the one hand, Milei exhibits an openness to political dialogue. On the other, he remains intransigent in his course and will not open his wallet or budge.”

The moves come as Milei’s La Libertad Avanza party scrambles to shore up his crumbling congressional support ahead of national midterm elections. The makeup of the Congress to be elected in late October will prove pivotal for the president's continued overhaul of Argentina's crisis-stricken economy.

“In this new phase, which we consider essential to implement the structural reforms that we've worked on, we are willing to strengthen ties with provinces that share the spirit of change,” Milei’s chief of staff, Guillermo Francos, wrote on social platform X.

Shortly after coming to office in late 2023 on the heels of the country's worst economic crisis in two decades, Milei dissolved or defunded over a dozen ministries as part of his effort to eliminate Argentina’s monumental deficits by diminishing the largess of the state.

He downgraded the crucial Ministry of Interior — which historically manages often tense relationships between the Buenos Aires-based federal government and Argentina's 23 provinces — to a secretariat.

Francos announced the new interior minister would be Lisandro Catalán, a low-profile technocrat who served in the country's previous center-left and center-right governments.

Catalán said he would lead what he called a “federal roundtable” aimed at rebuilding the government's fractured ties with state governors who hold sway over lawmakers from their provinces.

Milei is under pressure to expand his party’s tiny legislative base in Argentina’s Oct. 26 midterm poll that refreshes almost half Congress.

The president's La Libertad Avanza party, which formed in 2021, has no provincial governors. It holds just 10% seats in the Senate and 15% of the lower house of Congress.

A series of congressional setbacks — including lawmakers' recent passage of public university spending increases and success in striking down Milei’s veto of benefits for people with disabilities — has underscored the stakes of the midterms and the political costs of the president's reluctance to engage in dialogue.

It's unclear whether legislators will be able to reach the two-thirds majority needed to override the latest veto of the university spending bill. Argentina's teachers' unions called for a 24-hour strike on Friday to protest the veto.

Milei's spending cuts have tamed Argentina's severe inflation, with the government statistics agency reporting on Wednesday that monthly inflation in August remained stable at 1.9% — compared to 25.5% when Milei took office in December 2023 — despite the peso's exchange rate sliding 8% against the dollar in the past two months.

His economic reforms have thrilled international investors but also depressed economic activity and pushed up the country's unemployment rate.

The victory in Buenos Aires province for Argentina’s Peronist opposition — which stoked fears about the president's standing with voters — sent Argentina’s bonds, stocks and currency tumbling. The Peronists, who were defeated by Milei in 2023 presidential elections, are best remembered on Wall Street for defaulting on sovereign debt and heavy-handed interventions in the economy.

Questions have grown over Milei’s ability to sustain his harsh austerity agenda in light of a corruption scandal that has tainted his image and a bigger-than-expected defeat in Sunday’s elections for Argentina’s largest province.

In accepting his party's humiliating 13-point loss to Peronism in Buenos Aires province, Milei vowed not to abandon his free market overhaul. But he acknowledged making political mistakes and promised a period of “deep self-criticism."

“There is no option to repeat errors,” he told supporters last Sunday. “Looking to the future, we will correct all our mistakes.”

Milei appeared to move toward that goal on Wednesday with the reopening of the Interior Ministry. His administration said it would reach out to moderate governors from the opposition Peronist movement and former President Mauricio Macri's conservative PRO party.

During Milei's first year in office, the backing of moderate politicians outside his political party allowed him to pass wide-ranging legislation deregulating the strictly controlled Argentine economy. Their support also helped him bypass the opposition-dominated Congress to enact economic measures through emergency powers.

Now Milei hopes to win back their votes to pass his 2026 national budget proposal, which he is expected to submit to Congress next week.