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Fernández v. Bolsonaro: Argentina-Brazil Trade Now At Risk

It's no secret that Brazil's ultra-conservative leader and the incoming president of Argentina have deeply divergent political leanings.

Containers in Sao Paulo, Brazil
Containers in Sao Paulo, Brazil
Silvia Naishtat

BUENOS AIRES — After some nasty verbal exchanges between Brazil's conservative leader, Jair Bolsonaro, and Argentina's socialist president-elect, Alberto Fernández, nobody doubts that our relations with Brazil are set to change.

It will be a novel scenario for Argentina given the strategic importance of its centuries-old relationship with Brazil. Former presidents like our Raúl Alfonsín and Brazil's José Sarney understood this when they took the first steps to form a regional trade bloc — today's MERCOSUR — and discard the conflict option, which allowed Argentina to drastically curb its defense budget.

That pact seems to have languished in recent years and yet, there is still a high level of economic cohesion between the two countries, which also recognize the value of revitalizing the regional bloc while, at the same time, opening their economies up to the world. Could Bolsonaro's hostility hamper this resolve?

Some have suggested listening to the Brazilian military instead, both to their public declarations and to the quieter suggestions they make inside the Brazilian presidential palace. The army, after all, occupies seven of the cabinet's 20 top ministry positions. It's also worth noting what the powerful General Augusto Heleno Ribeiro said about Argentina: that it cannot be excluded from MERCOSUR or from Brazilian society.

Bad relations between Bolsonaro and Fernández will cancel out the so-called presidential diplomacy.

Nevertheless, there definitely seems to be a political transition underway, as noted by foreign affairs analyst Marcelo Elizondo. For one thing, expect the tradition of Brazilian leaders attending Argentine presidential inaugurations to be broken when Alberto Fernández officially takes office next month. And it won't be Bolsonaro's first affront: He snubbed his friend Mauricio Macri, the outgoing president, when he made Chile, not Argentina, the first port of call after his own election.

One thing is sure, namely that bad relations between Bolsonaro and Fernández will cancel out the so-called presidential diplomacy that is always inclined to resolve problems. New avenues will probably emerge elsewhere, on the other hand.

Bolsonaro in Brasilia on Oct. 29 — Photo: Jorge William/GDA/ZUMA

In spite of its fragile and unpredictable economy, Brazilian firms have invested $16 billion in our country. They stand out in the meat export sector, led by the Brazilian companies Minerva and Marfrig. Gol is the main foreign airline here. Almundo, bought by Brazil's CVC, is a leader in travel, and Natura is a major player in online sales. The Itaú, Patagonia and Bradesco banks have grown, furthermore, through partnership, and Dasa, the Brazilian medical services firm, has made inroads in our health sector by buying Diagnóstico Maipú.

Brazil is Argentina's top export market.

Brazil is also Argentina's top market for exports. Of the $61 billion in total exports that Argentina produces, $11 billion worth go to Brazil. Besides vehicles, exports to our neighbor include added-value goods like chemical products, farming machinery, plastics, measuring instruments and processed foods. Many of these are produced by small and medium-sized industrial firms. Argentina is, in turn, Brazil's third export market, after China and the United States. We buy iron ore, oil and are the biggest market for industrial goods.

Marcelo​ Elizondo sees serious trouble ahead if Bolsonaro makes good on this threat to lower the common external tariff. Doing so would cost Argentina its position as a privileged trading partner.

The analyst believes this is part of Bolsonaro's program to open the Brazilian market, with the EU free-trade deal being "merely a step toward positioning itself as a continental leader." His agenda is backed by an industrial structure in Brazil that is already global and seeks greater presence abroad, Elizondo says.

What could happen specifically with the EU pact? Elizondo thinks Brazil could swiftly ratify and implement it. That would represent an enormous competitive disadvantage for Argentina as it loses its exclusive, preferential tariff regime with Brazil. The "risk is immense," he says.

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