Key Takeaways
- The Province of Buenos Aires, led by Governor Axel Kicillof, secured legislative approval for new debt exceeding US$3.7 billion, which requires mandatory authorization from the national government.
- National Economy Minister Luis Caputo questioned the authorization, alleging Buenos Aires is non-compliant with the Fiscal Responsibility Law by raising current spending above inflation, while allies of President Javier Milei vowed an outright veto.
- The provincial government escalated the dispute, with cabinet minister Carlos Bianco warning that if the federal government denies the funding, they will immediately launch a formal judicial complaint, setting the stage for a new court battle.
The simmering fiscal tension between the administration of President Javier Milei and the powerful Province of Buenos Aires, governed by Peronist Axel Kicillof, has erupted into a full-blown political and legal confrontation following the province’s successful legislative push for massive new debt.
The Buenos Aires Legislature recently approved an emergency measure authorizing Kicillof’s government to take on approximately US$3.7 billion in new debt. However, this move requires the explicit financial backing and authorization of the national Ministry of Economy, currently headed by Luis Caputo, to be placed on international markets. The federal government has cast serious doubt on whether it will grant this crucial authorization, prompting the province to issue a direct threat of judicial action.
The national position was articulated by Minister Caputo, who suggested that technical legal grounds preclude the approval. “There is a law, the Fiscal Responsibility Law, dating back to 2004, in which provinces commit not to take on debt if current expenditures exceed inflation,” Caputo stated, noting that Buenos Aires is currently failing to comply with this rule by increasing spending beyond the inflation rate. Therefore, he argued, new debt “should not be subject to approval because it is not complying with the fiscal responsibility law.”
While Caputo maintained a technically oriented critique, high-profile figures within the ruling La Libertad Avanza (LLA) party were far more definitive in their rejection. Sebastián Pareja, a key LLA operative in the province, asserted unequivocally that the President would not support the measure. Speaking on LN+, Pareja declared, “Milei is not going to accompany it. Under no concept, under no point of view,” referring specifically to the portion of the debt not earmarked for refinancing prior obligations but intended for municipal distribution.
This sentiment was amplified by LLA bloc chief in the provincial Chamber of Deputies, Agustín Romo, who accused Kicillof of having approved the debt “at 3 a.m. to finance his presidential campaign.” Romo further alleged the measure involved “subasting the Banco Provincia” by using the negotiation to increase the number of positions on the bank’s board from eight to 14 to secure votes. President Milei personally celebrated his party’s opposition, calling Kicillof’s actions “Kirchnerism by the book” and “delinquent policy.”
Kicillof initially reacted with irony, urging Caputo to approve the debt “rapidito” (quickly). However, faced with concrete signs of denial from the Casa Rosada, the provincial tone shifted to outright menace. Carlos Bianco, Buenos Aires’ Minister of Government, warned the newspaper *La Nación* that denying the province the ability to finance its deficit would be a “scandal.” He added a definitive warning: if the federal government blocks the authorization, the province will file a formal judicial complaint against the decision.
The debt was secured in a dramatic overnight legislative session with support not just from Kirchnerist lawmakers, but also from members of Pro, the UCR, and the Civic Coalition, highlighting the cross-party alliances Kicillof must forge amid federal austerity. The conflict is seen by analysts as a critical test of intergovernmental fiscal relations, determining whether the federal government will use its financial leverage to force compliance with fiscal austerity policies, even if it triggers a significant constitutional clash.