Argentina's Milei inks political pact to bolster economic plan

The deal, signed soon after midnight with 18 governors, looks to allay market doubts about Milei's ability to weather the worst economic crisis in decades, which has pushed half the population into poverty and sent inflation surging to near 300%.

"Argentina finds itself at an inflection point," Milei, a radical libertarian economist, said in a speech later in the northern city of Tucuman, where Argentina declared independence from Spain more than two centuries ago.

"The people demand a change of direction."

Bonds and the peso currency have come under renewed pressure after an initial strong market rally when Milei took office in December, as the economy has since slid into recession and political tension has bubbled.

Milei's La Libertad Avanza party lacks a parliamentary majority and has no provincial governors, so it must bargain with other political parties to carry out its agenda.

Among the 10 items covered by the pact, Milei's government highlighted a non-negotiable balanced budget, sharp cuts in public spending, as well as tax and labor reforms.

"This pact shows that governors from different political parties can join forces so that the national government can manage this commitment," Martin Llaryora, governor of the central province of Cordoba, told reporters late on Monday.

In late June, Argentine lawmakers passed two major legislative reforms backed by Milei and aimed at kickstarting the economy, slashing public spending and attracting private investment. But markets have fallen back in the last week.

On Monday, the peso weakened some 2% in the parallel informal market, to hit a record low of 1,450 to the dollar.

The signing of the deal was delayed from May 25. It is known as the "May Pact," for Argentina's May Revolution against colonial ruler Spain, and was signed in the historic building where independence was formally declared in 1816.