Milei not expected to disrupt business between Argentina and Brazil

Political tensions between major trade partners Brazil and Argentina are set to grow after Javier Milei, a right-wing libertarian, won Sunday’s presidential election, but business will be less affected.

Milei had previously lashed out at Brazil's leftist leader Luiz Inácio Lula da Silva, who in turn managed to congratulate Argentina's president-elect in a tweet without mentioning his name.

"The relations between Brazil and Argentina have a long history, both in terms of trade and investment. The fact that we have presidents with antagonistic political views will make the political relationship between countries cold, but little will change in business relations," Welber Barral, founding partner of BMJ Consultores Associados and former Brazilian foreign trade secretary, told BNamericas.

Argentina is Brazil's third largest trade partner after China and the US.

"If we think pragmatically, the fact that Milei is in favor of economic liberalism can help fuel trade and business between the two countries, even with the political differences between the now elected president of Argentina and the current president of Brazil," he added.

Barral arrived in Buenos Aires in October and will stay a few more weeks to advise clients on the changes Milei will announce after taking office on December 10.

"Right now, companies from Brazil and other countries that do business in Argentina want to understand what the new government's economic program will really be in order to make their investment decisions," said Barral.

On the campaign trail, Milei vowed to leave the Mercosur trade bloc formed by Argentina, Brazil, Paraguay and Uruguay, which would cause the collapse of negotiations with the EU.

"Mercosur will not end, even if Milei wants to. Because a trade bloc involves political and business forces established for years. Furthermore, no country can replace commercial relations with countries in the short and medium term and Argentina cannot give up trade with Brazil and with China," José Augusto de Castro, president of Brazilian foreign trade association AEB, told BNamericas.

"However, regarding new agreements, which are still being negotiated by Mercosur, such as the accord with the European Union, having a president in Argentina who does not have goodwill with Mercosur, creates another headwind against the conclusion of the trade deal," said De Castro.

Both countries’ bilateral relationship hit a low during the 2019-22 term of Jair Bolsonaro, who avoided direct contact with his Argentine counterpart, Alberto Fernández, over ideological differences. Tensions subsided only after Lula mended fences when taking office in January this year.