After theLula's election a year ago and that of Javier Milei for a few weeks, the South America is located at a crossroads, especially in redefining the balance of power within the continent and international relations. The first two economies of the area, Brazil e Argentina, have in fact elected two completely opposite presidents, but who will necessarily have to talk to each other to consolidate the business relations (Brasilia is Buenos Aires' first partner, and Buenos Aires is Brasilia's third, behind only the USA and China) and then to decide on common geopolitical strategies: relaunch Mercosur, the Latin American free trade agreement established in 1991 but which Milei would like to question, or be handed over bilaterally to the great global powers? And in the second case, it is better to confirm the historic axis with the Western world or follow the wave of the Brics and in particular of China, which for some time has already had a preferential lane with South America for raw materials, offering in exchange investments and infrastructure?
Milei wants to say goodbye to Mercosur and China
The new president of Argentina, Javier Milei, would like to say goodbye be al Mercosur that the China, dollarizing the economy of his country as already done in the area by El Salvador, Panama and Ecuador. On his intentions hovers however the veto more moderated Mauricio Macri, former president and leader of the liberals who were decisive, at the polls and in Parliament, for the victory of the sovereignist outsider.
Squid for his part he finds himself in an even more complicated situation: on one side he is seeing the “red” wave vanish” which had seen the election, in recent years, of centre-left and therefore “friendly” governments in practically all Latin American countries; on the other hand he has been the rotating president of Mercosur since July this year, within which however everyone - and not just Argentina - seems to want to go their own way, just when the time would have come to ratify a historic and challenging trade agreement with the European Union. Milei's recent victory has definitely reduced the "red" wave: now they are well four countries are governed by the centre-right after the victories, all in 2023, of Santiago Pena in Paraguay, of Daniel Noboa in Ecuador and of Milei in Argentina.
Uruguay (and not only) looks to Beijing
In Uruguay, however, the liberal has already been president since 2020 Luis Lacalle Pou, which he put maintenance in the long run it was the socialism di Pepe Mujica. Uruguay is precisely one of those countries that most insists on make an alliance increasingly explicit with Beijing, after the president visited his counterpart Xi Jinping and the two even appeared together, immortalized while shaking hands, on the cover of the popular magazine Renmin Ribao. According to the Chinese press, Lacalle Pou would have "set the table for trade agreements with other Mercosur countries". In fact, these relationships have existed for some time, just think that in recent months Argentine companies have started using yuan instead of dollars for transactions with China, and that Brazil has been the Asian giant's first trading partner for a couple of years. (especially for raw materials, starting with soya and beef) and the first country where the Dragon's foreign investments are destined.
However, formalizing and ratifying such partnerships would have a certain weight, especially in front of the international community and governments United States, which has always been they consider South America their “garden” and that right with Joe Biden they are betting everything on the restoring, that is, on the rapprochement of their affairs from Asia to neighboring Mexico, and consequently to the Latin American bloc.
Doubts about the free trade agreement with the EU
In this scenario, while Milei will only take power on December 10, the Brazilian Lula is the rotating president of Mercosur, which in recent weeks should ratify the controversial free trade agreement with the European Union. In South America the debate is very open: according to many experts, Lula should think about it a little more, perhaps proposing some changes. The economist from the University of Sao Paulo Andre Roncaglia he even talks about a agreement “with Bolsonarist DNA”, which should be sent back to the sender (i.e. to Brussels) also by virtue of the flop of other similar documents proposed in the past by Europe to New Zealand and Australia.
According to Roncaglia and other experts the text already signed by Ursula Von der Leyen, who among other things plans to further limit imports of raw materials deriving from the deforestation of the Amazon, it is asymmetrical. In short words, it suits Europe much more than Brazil and South America.
First of all, because over half of Brazilian exports to the EU consist of raw materials, while these represent 3% of trade in the opposite direction. The situation is reversed for capital and consumer goods: Europe exports 54% of the total, Brazil only 16%.
Risk of giving up on reindustrialisation
Forging a bond with Europe therefore means consolidating this scheme, which it could mean for Brazil and South America give up permanently to the reindustrialization and independent technological progress, confirming itself mainly as a supplier of raw materials. Moreover, increasingly precious: think not only of oil and soy but also of all those rare metals, starting with lithium, which are fundamental for the global economy of the energy transition.
The asymmetry on duties
Another aspect is that of the duties, which in our country are on average much lower than those adopted in South America (1,8 15% against%), and therefore standardizing them downwards is more convenient for us. Last but not least, there is the question of the minimum import quota from Latin America that Europe undertakes to guarantee: according to estimates, this quota as it is set today is lower than the volume currently exported. Basically, Brussels would like to consolidate South America as an outlet market for its industry and continue to have easy access to commodities, but keeping its hands relatively free. This "technological asymmetry" is also being seen in the EU-New Zealand agreement, which comes into force in 2024, while it is no coincidence that Australia, in negotiations with Brussels since 2018, has decided that nothing will be done about it.
On Sunday 3 December, after COP28 in Dubai, Lula flies to Berlin to see Olaf Scholz: we will talk above all about this.
