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Analysis
Latin America seeks new global partners

Latin America seeks new global partners

Argentina, Brazil unite to confront US protectionism

by David Smith in Buenos Aires

Fri 10 Feb 2017

Brazil and Argentina, long locked in a rivalry that extends far beyond the soccer field, have pledged common cause this week. Their presidents convened an urgent summit on 7 February in Brasilia, designed to send a strong message to Washington and an offer of change to Europe and Asia.

Greeting his Argentine counterpart Mauricio Macri, Michel Temer, Brazil’s president, did not need to mention Donald Trump by name to make his point. ‘Faced with such heightened nationalism, and such growing protectionism,’ he said, ‘our response to the new isolationism has to be greater integration, not just between our two countries but across Latin America.’ Macri added: ‘Let’s be rivals only on the soccer field. Given all the uncertainty and the new barriers to free trade, we have to be allies for the 21st century.’

Sceptics are pointing to the small number of agreements signed this week, and both men’s limited freedom to operate. Temer is an interim leader grappling with Brazil’s worst economic crisis in decades, and Macri is a president hoping that Argentina’s slow recovery can still reward his party in the mid-term elections later this year.

‘Donald Trump is making these two countries allies of necessity now, not a marriage of largely rhetorical convenience as in the past,’ said one of Brazil’s most senior diplomats. ‘It’s no longer “Argentina needs us more than we need them”. It’s that we both need each other to confront the wind of change, of nationalism and protectionism, of Trump.’

Both leaders stressed the urgent need for Mercosur, the subregional trading bloc whose full members include Argentina, Brazil, Uruguay and Paraguay, to strengthen its international position.

‘Mercosur has never lived up to its mandate, a non-starter as a trading bloc, rather a political football kicked around by its members to score points on this issue or that,’ confides one of Macri’s economic advisers. ‘Now Mercosur could kick-start a regional awakening of the age-old truth – stronger together, than separate.’

The target partners for a new Mercosur must be Europe and Asia. ‘The European Union has to have a much greater interest in finding an agreement with us now,’ Macri remarked, suggesting stalled talks over a pact between Mercosur and the EU should begin again in earnest.

Brazil, with its large Japanese population, sees Tokyo as the most likely partner in Asia. It is no secret that Japan, disappointed by the collapse of the Trans-Pacific Partnership, is examining the possibility of closer ties with Latin America.

‘The Trump agenda is having unintended consequences, I judge, in Latin America,’ says one veteran economist in Buenos Aires. ‘For so long too many of our countries have been protectionist, and nationalist. Now they see the ultra-protectionist in the White House, and it takes one to know one. They know they have to respond. Ironic to consider it, but fear of Trump may drive change.’

Temer and Macri see opportunity in the new US administration’s agenda. Mexico, Latin America’s second-largest economy after Brazil, is certain to listen seriously to overtures on economic co-operation with the sizeable markets to the south in the light of Trump’s hostility, and his plan for a giant wall on the US-Mexico border. Macri has already spoken with Enrique Peña Nieto, president of Mexico, on this issue. Trump’s rejection of the TPP likewise leaves Chile, Peru and potentially Colombia without the access to global relationships that would have been theirs if the alliance had gone forward.

Presidents Macri and Temer believe the time is right for Mercosur to expand northwards. The bloc may yet develop its narrow base and become the regional force that was envisaged at its formation in 1991.

David Smith is a Member of the OMFIF Advisers Network and represented the UN Secretary-General in the Americas between 2004-14.

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