Milei's rumbling sparks fear of failure on the last few meters
Argentina's incoming president Milei cursed China, Brazil and the South American economic alliance Mercosur during the election campaign. The EU wants to conclude its free trade agreement with Mercosur as quickly as possible. Milei's assumption of office could have consequences for this.
A business partner should be reliable. Javier Milei, Argentina's next president, may only fulfill this requirement to a limited extent given his appearance and limited experience in government. However, Germany and the European Union will have to officially deal with the libertarian and his newly assembled team once he takes office on December 10. Especially if they want to finally bring the much-awaited free trade agreement with the South American economic area Mercosur into force - and the final negotiations are not concluded in the next two weeks.
From the point of view of German industry, it would be a major blow if the current intensive talks were to fail in the final stages. "The EU-Mercosur trade agreement is of great importance to the German economy," said Melanie Vogelbach, foreign trade expert at the Association of German Chambers of Industry and Commerce (DIHK). The EU must therefore put pressure on the conclusion of the agreement.
12,500 German companies export to the Mercosur states. Exports amounted to 16 billion euros in 2022. Exports to Brazil alone increased by 2.5 billion euros last year. An initial version of the historic agreement was signed back in 2019, when former President Mauricio Macri was still in power in Argentina. However, doubts grew, particularly from the Europeans. An additional agreement is now being negotiated. So far, the stumbling blocks have been additional demands for environmental requirements from Europe as well as objections from European farmers - and fears for South America's own industry.
According to EU Commission President Ursula von der Leyen, Brussels wants to conclude the negotiations on additional agreements by 2023. Brazil is also pushing for the agreement. According to Argentinian media, the topics of negotiation in November were forest protection, export tariffs, electric cars - Argentina and Brazil want to protect their production sites - as well as rules for public sector tenders.
Radical ideas
Milei had fired off a whole battery of radical ideas in his television appearances during the election campaign and in the years leading up to it, some of which had already dragged the South American country and its population into the abyss. He has also repeatedly presented himself as a roaring ideologue. His enemy is clear: "Zurdos de mierda!", i.e. "fucking leftists", socialists, Marxists, communists and, in any case, "the state" as a whole. He said several times that the private sector would be able to do what it wanted under him, but that Argentina should not do business with "communists" such as China, Cuba or Venezuela.
During the election campaign, the libertarian even threatened to leave Mercosur with its other member states Brazil, Paraguay and Uruguay. It will probably not come to that, but the future head of state has already gone on a confrontational course with Brazil's President Lula da Silva. He called the socially oriented head of state of the neighboring country a "thief" and "angry communist". Lula has now announced that he will not be attending Milei's swearing-in ceremony for this reason.
Argentina and Brazil are the two largest economies on the continent, the heart of Mercosur and maintain close economic relations. Even under Milei, they would have to continue to coordinate with each other at the highest level when it comes to Mercosur. Lula later said that he wanted to continue working with this important partner "to solve problems". Everyone has to defend their own interests: "He doesn't have to be my friend." Lula had never made a secret of the fact that he would have preferred to see his neighbor, the defeated Peronist candidate Sergio Massa, as the new head of state. Parts of his election campaign team, with whom he won against the right-wing populist Jair Bolsonaro, supported Massa in his campaign. Bolsonaro announced his intention to attend Milei's swearing-in ceremony.
The incoming head of state has enormous domestic political problems ahead of him: the central bank reserves are empty, the Argentine peso is rapidly losing value and the poverty rate is at 40 percent. At the same time, the trade balance is negative - ideally, Argentina needs to increase its exports quickly and produce more domestically instead of importing. The most important foreign trade partner is Brazil, followed by China and the USA. Most imports come from the Asian economic power.
Geopolitical key
South America is seen as an important building block in Europe's efforts to become less economically dependent on China. A closer partnership with the continent has been of enormous geopolitical importance for the EU since the Russian invasion of Ukraine. In addition to new sales markets, it is particularly about access to lithium and other important raw materials from democratic partner countries.
However, in view of the historic upheavals in Argentina's political landscape, a deal is no longer certain. During the election campaign, Milei described the agreement with the EU as a "bad customs union that diverts trade and puts the member countries (of Mercosur) at a disadvantage". The libertarian has allied himself with those who relativize the crimes against humanity of the past military dictatorship and is therefore seen by critics as part of the global New Right. His vice-candidate Victoria Villarruel, an apologist for the dictatorship, whose number of victims is officially estimated at 30,000 dead and disappeared, is being touted as the next security minister.
In addition, Brazil is likely to be the last missing member state of Mercosur to agree to Bolivia's accession to the economic alliance. It could bring further interests of its own to the negotiations. Huge quantities of lithium are also stored in Bolivia.
Ideological interest
Steffen Hebestreit, spokesman for the German government, said that they were working towards a deal and were optimistic. The talks are well advanced, the Brazilian state secretary in charge gave an insight at the beginning of November: "The idea is to announce (the agreement) in December at the meeting in Rio de Janeiro." On December 7, three days before Milei takes office in Buenos Aires, the Mercosur countries will meet in the Brazilian metropolis for a summit. If a signed agreement is presented there, the national parliaments of the EU and Mercosur states would then have to ratify the agreement.
If this does not happen on December 7, the EU and Brazil will have to deal with Milei in the future. However, his radical vision of the free market and hostile attitude towards China could also be an advantage for the EU. The libertarian wants to shrink the state, abolish all export duties, most taxes and the peso, and allow foreign currencies. To achieve this, the new president needs international allies who fit into his world view as far as possible. After all, Argentina's raw materials and goods have to come from somewhere - and the new money has to come from somewhere. Why not from the EU?
If Milei's radical ideology and proposed policies negatively impact the negotiation process, the EU might need to adapt its approach with Argentina to secure the free trade agreement. The EU must consider Milei's stance towards China, Brazil, and Mercosur, as well as his opposition to certain social policies, in order to maintain strong trade relations.
Lula da Silva's perceived tension with Milei could potentially affect Mercosur's coordination and the overall success of the free trade agreement negotiations. The EU will have to navigate this political landscape effectively to overcome any obstacles and conclude the agreement with Argentina and other Mercosur members.
The EU's ambition to establish close economic relations with South America, particularly to secure raw materials and reduce economic dependence upon China, is increasingly important in the context of geopolitical challenges. However, ensuring a successful free trade agreement with Argentina will require addressing Milei's liability-averse disposition and ideological differences.
Source: www.ntv.de
