Lula-Milei rift hurting Brazil-Argentina trade

The poor relationship between the presidents of Brazil and Argentina, Luiz Inácio Lula da Silva, and Javier Milei, is affecting trade between the two nations and could cause even deeper damage.

"The relationship between the two presidents does not exist in terms of dialogue and negotiations and this is impacting the trade relationship between the countries, with the trade balance between the two nations falling and likely to deteriorate even further," José Augusto de Castro, president of Brazilian foreign trade association AEB, told BNamericas.

In the first five months of the year, bilateral trade between Brazil and Argentina reached US$10.1 billion, down from US$12.5bn in the same period of 2023, according to Brazil's trade ministry. That picture is even worse for Brazil, as the country's exports to Argentina tumbled over 33% to US$5.0bn in the period, with imports up 1.2% to US$5.1bn.

"In the medium and long term, we will likely see China and the US filling the gaps that Brazil is losing in terms of with trade with Argentina," said Castro. 

Relations between Lula and Milei have been tense since the runup to the 2023 presidential election in Argentina. During the campaign, Lula expressed open support for government candidate Sergio Massa, who was the economy minister under president Alberto Fernández, one of Lula's closest international allies. 

In response to that, Milei made a series of attacks against the Brazilian president during the campaign, calling him corrupt and labelling him a communist on several occasions.

In spite of apparent attempts by Milei to smooth relations after his victory, including sending a personal letter delivered by foreign minister Diana Mondino to invite him to the inauguration ceremony, Lula reportedly felt sufficiently offended to snub the invite. 

Those differences look likely to escalate this month, as Milei is expected to attend an event of global right-wing political forces set to take place in Brazil's Santa Catarina state on July 6-7, organized by former Brazilian president Jair Bolsonaro, also an antagonist of Lula.

Due to his trip to Santa Catarina, Milei is not expected to attend a meeting of Mercosur leaders on July 7-8 in Paraguayan capital Asunción. His absence from the trade bloc summit highlights another adverse effect of the negative relations with Lula.

"Negotiations over a trade agreement between Mercosur and the European Union were already very difficult due to disagreements between the European leaders. Now, with the absence of dialogue between Brazil and Argentina, it's unlikely that we will see any progress towards an agreement between the two blocs," said Castro.