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Brazil and Argentina: challenges and opportunities in bilateral relations

The relationship between Brazil and Argentina, historically characterized by a complex mix of cooperation and rivalry, is experiencing a moment of redefinition. Recently, both countries have faced significant challenges, both in the economic and political spheres, that directly affect bilateral dynamics. These relations are shaped by political changes in both countries and by a regional economic scenario that imposes additional pressures on South American economies..

The election of a new president in Argentina raised expectations of an adjustment in bilateral relations. With the inauguration of Javier Milei, an economist with liberal positions and criticism of state interventionism, uncertainties arose about the future of the partnership with Brazil, especially considering Milei's previous statements about the need to move away from Mercosur and protectionist policies. However, the recent visit of the Brazilian president, Luiz Inácio Lula da Silva, Buenos Aires signaled an attempt to keep dialogue channels open, highlighting the importance of a stable and productive relationship between the two largest Mercosur economies.

On the economic side, bilateral trade is one of the main anchors of relations between Brazil and Argentina. In 2023, the two countries continued to be important trading partners, although commercial exchanges have been affected by exchange rate issues and the economic policies adopted by both governments. A Argentina, facing a serious economic crisis, with high inflation and difficulties in accessing international credit, depends heavily on trade with Brazil to maintain a minimum of economic stability. Brazil, in its turn, sees Argentina as a key market for its industrial exports, especially vehicles and machinery.

One of the central themes in bilateral discussions has been the need for greater trade balance and the search for solutions to the Argentine currency crisis., which directly affects Brazilian exports. During recent meetings, there were discussions about possible financing mechanisms for trade, such as the use of local currencies or the creation of credit lines that allow Argentina to continue purchasing Brazilian products without increasing its dollar reserves, which are at critical levels. However, Such solutions still face technical and political challenges to be implemented effectively.

Politically, the new Argentine government seeks to redefine its regional alliances, and Brazil is attentive to these changes. While Milei expressed interest in strengthening ties with other free market economies,, like the United States, he also recognized the importance of maintaining good relations with South American neighbors. The Brazilian government, in its turn, adopts a stance of pragmatism, seeking to preserve regional integration and avoiding friction that could weaken Mercosur. Lula's position has been in support of integration, even in the face of ideological differences, highlighting the importance of a united South America to face common challenges, like poverty, climate change and economic dependence on external markets.

On the international stage, Both Brazil and Argentina face the challenge of repositioning themselves in an increasingly multipolar world. Brazil has sought an independent foreign policy, diversifying partnerships and strengthening ties with the BRICS, while Argentina, under Milei's government, signals a movement more aligned with the West, especially with the United States. This difference in strategies can create challenges for political coordination in Mercosur and other regional forums, but also opens up space for a complementarity of approaches that, if well managed, can strengthen South America's position on the global stage.

Projecting future scenarios, Relations between Brazil and Argentina will depend on the ability of both governments to maintain a constructive dialogue and find pragmatic solutions to the economic and political challenges they face. A positive scenario involves continued robust trade, with possible adjustments in financial mechanisms to overcome Argentina's exchange rate difficulties, in addition to expanded cooperation in areas such as energy, infrastructure and security. However, a more challenging scenario may emerge if ideological and economic divergences increase, leading to a weakening of Mercosur and a greater distance between the two nations.

Rodrigo Cintra
Post-Doctorate in Territorial Competitiveness and Creative Industries, by Dinâmia - Center for the Study of Socioeconomic Change, of the Higher Institute of Labor and Enterprise Sciences (ISCTE, Lisboa, Portugal). PhD in International Relations from the University of Brasília (2007). He is Executive Director of Mapa Mundi. ORCID https://orcid.org/0000-0003-1484-395X

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