Brazil & Southern Cone - March 2026

President Javier Milei scored one of his biggest victories yet when congress approved his sweeping labour reform in late February. The overhaul throws out much of the labour legislation that had been in place for over half a century. The new law essentially makes it cheaper and easier to hire and fire workers in Argentina by cutting employee benefits, reducing employer obligations, and limiting the power of unions.

The resounding victory in mid-term elections last October that boosted Milei’s support in congress, his newfound willingness to negotiate, and a weakened workers’ movement meant that the government’s labour bill passed its final hurdle in the senate on 28 February with 42 votes in favour and 28 against.

Overall, Milei seems to have learned from his rather tumultuous relationship with congress during the first two years in office. Instead of his all-or-nothing approach, which led to costly defeats of vetoes on key spending bills, his administration this time around settled for the politically feasible rather than the ideologically ideal. Indeed, the ability to forge a solid majority over a controversial proposal signalled a level of governance that many international investors feared was missing.

Its supporters say the reform will attract foreign investment, boost productivity, and limit labour lawsuits. Detractors say fundamental workers’ rights are being undermined, and any potential benefits will likely boost corporate balance sheets rather than monthly pay checks. One of the bill’s most contentious provisions involves diverting national pension contributions into a new, employer-funded severance pool. While this move aims to give companies more flexibility in managing layoffs, opposition lawmakers warn it could seriously deplete the country’s pension reserves.

Unions staged a nationwide strike, and two demonstrations outside parliament ended with protesters battling the police during congressional proceedings. In a last-ditch attempt, the Confederación General del Trabajo (CGT), the labour union confederation, on 2 March took to court to challenge the constitutionality of the law. “This law represents a serious infringement of collective and individual rights that expressly violate constitutional principles,” the CGT said in a statement after its lawyers filed the complaint in the courts of Buenos Aires.

Not surprisingly, many Argentines do not trust the far-right, liberal economist Milei to look after their labour rights, and polls show Argentinians are divided on the reforms, with 48.6% in favour and 45.2% against, according to a recent survey by polling firm Zentrix.

Labour lawsuits

There were a number of anomalies in the Argentine labour market, considered to be one of the most rigid in the world. And by fixing some of them, the new legislation has gone a long way to make Argentina more competitive.

The legal quagmire surrounding labour disputes had been a major disincentive for businesses. According to the union of labour risk insurers (UART), there are 21 times as many lawsuits over terminations in Argentina as in Chile, and 15 times as many as in Spain. “We are here to eliminate this litigation industry that devastated Argentina for 20 years and through which only a few benefited,” Economy Minister Luis Caputo said.

Dismissing workers in Argentina was only permitted in specific cases defined by law. Severance pay exceeded that of regional peers, and ongoing labour costs such as social security taxes were more than double what they are in Mexico, and more than five times those in Chile, according to the Organisation for Economic Cooperation and Development (OECD).

All that led Argentine companies to either live with higher costs, not hire as many workers, or hire them off the books. For the size of its economy and the level of development, Argentina has traditionally had a high level of informal employment, where workers are not officially registered, do not pay or receive social security, and often are not covered by laws and regulations regarding pay, job security, or workload.

Most reports place off-the-books employment at 40%-50% in Argentina, compared with 70%-80% in Peru and Bolivia, but only 25%-30% in Chile and Uruguay. In Brazil, a combination of economic growth, tax incentives, and heightened enforcement helped lower informality from around 60% in the early 2000s to around 38% in 2024. To help formalise employment the new law slashed the social security tax companies have to pay per worker.

When asked about the labour reform, International Monetary Fund (IMF) spokesperson Julie Kozak praised the reform agenda the Argentine government is carrying out, calling the economic stabilisation plan “impressive”. But Kozak cautioned that properly mitigating the transition costs associated with these reforms is also going to be important.

More needed

While the labour reform has helped boost investor confidence, it is only part of a broader puzzle that needs to be sorted to fix the multiple distortions that have caused Argentina to face frequent economic crises and default on its sovereign debt nine times throughout its history.

“There’s unanimity that on its own it doesn’t generate jobs, that happens when there’s more activity,” said Gustavo Weiss, president of the Argentine chamber of construction (Camarco). In various interviews to the Argentine media given in February, Weiss also called for the return of public investment in infrastructure, suggesting that the Milei government’s emphasis on attracting private investment will be insufficient. 

The reform comes at a time when Milei’s shock therapy of opening the borders to foreign competition after decades of protectionism is putting pressure on domestic firms and driving up unemployment. The bill aims to increase formal hiring, but potential growth sectors such as oil and gas, agriculture, and mining do not employ as many people as the less efficient manufacturing jobs that are being lost.

Just as the labour reform made its way through congress, opinion survey results released by pollster Zuban Córdoba y Asociados in early March showed the two most pressing issues for Argentines today to be low wages and the lack of job opportunities. The polling firm’s data also showed that over a third of respondents believed that the government’s labour reform would mainly benefit only the largest companies and less than a quarter believed that society as a whole would benefit.

Main points

The labour reform will permit companies to negotiate wages and benefits directly with workers and local unions rather than on an industry-wide basis that applies nationwide, and it will limit the right to strike by requiring minimum operations for essential services during work stoppages. It is also expected to make it easier for companies to fire workers, as well as curb workers’ ability to sue employers upon dismissal, narrow the definition of what severance is for the purpose of labour lawsuits, and cut the amount of severance pay, but also create an obligatory fund employers contribute into to finance severance payments.