Tension Grows between Argentina and Brazil over the MERCOSUR-EU Agreement, Expert from Argentina Says

At the end of 2018 MERCOSUR and the Eurasian Economic Union signed a Memorandum of Cooperation; however, relations between the parties are moving slowly. An important factor here is the difficult economic situation in Argentina. The latest example – on February 18, the International Monetary Fund refused to restructure Buenos Aires's $44 billion loan debt. At the same time, Argentina is trying to find a mutually acceptable stance with Brazil about a trade deal with the EU. The member of the Argentine Council of International Relations (CARI), Executive President of Regional Coordination Committee of Economic and Social Studies (CRIES) Andres Serbin, has told Eurasia.Expert about the factors that influence the Argentinean leadership in setting their foreign policy priorities.

– How would you characterize Russian-Argentine relations in 2019? In what areas is progress being observed, and where is there still unrealized potential?

– In 2019 the relations between the Russian Federation and Argentina continued their sustained growth and development, even if it didn´t reach the close political relationship established during the Cristina Kirchner´s government, particularly in 2015. In the economic sphere there is enough room to improve and deepen the relations, which reach a $610 million exchange in the first semester of 2019, however far from the target of $5 billion set as a goal during the Kirchner´s government. Nevertheless, political relations continued to be fluid, particularly after president Macri meeting with president Putin during the G20 Summit in Buenos Aires in 2018.

Both sides were talking about the potential of the relationship in the economic sphere. On the Russian side particular interest was shown in building new railways and by Rosatom in funding the building of a large nuclear power station. On the Argentine side, there is a consistent growth of the export of agricultural goods and food products, even if there was a threat to restrict imports of Argentine beef in December 2019 due to phytosanitary measures.

– In August 2019, representatives of the Eurasian Economic Commission and Argentina signed a Memorandum of Cooperation in the field of agriculture. How do you assess the prospects for cooperation between the EAEU and Argentina in 2020?

– The election of Alberto Fernández to the presidency in 2019 increased the expectation of a growing relationship between Russia and Argentina, as usually Peronist governments are more open to diversifying their economic and political ties and there is always a trend not to be closely allied with the United States.

However, Argentina´s dire economic situation and the pending debts both with the IMF and other financial international institutions and private creditors are forcing the new administration to prioritize this economic issue over other policies, particularly taking into account the key role that the US administration influence can play at the IMF.

This is not an issue that is going to be solved easily or in the short-term, so most of the other initiatives that the current government could develop are strongly tied to the advances in the field of the debt problem.

– In your opinion, is it likely that in 2020 Argentina and the EAEU will advance the process of creation of a free trade zone?

– In the short term, even if Buenos Aires aspires to a diversification of its international links, this situation can undermine further steps regarding bi-lateral advances in the negotiation with the EAEU. Once again this negotiation is subordinated to what is going to happen with Mercosur.

– What are the opinions in Argentina about the idea of signing an agreement on a free trade zone with the Eurasian Economic Union?

– Even if Fernandez government can be leaning towards protectionists positions, there can be an interest in advancing talks with the Eurasian Economic Union (EAEU) regarding a free trade agreement, but this interest depends of economic and political variables that are not clear at this point.

The priorities for the Fernandez´s government are currently aimed at the relationship with the Trump administration – key in the process of negotiating the debt with the IMF – and the Bolsonaro government in Brazil.

Brasilia is pushing for a quick negotiation of the agreement between the European Union and MERCOSUR – where the two largest players are Brazil and Argentina. The relationship between the governments of these two countries is tense, as Bolsonaro´s team and, particularly, Brazilian Minister of Economy Guedes – a fierce neoliberal who studied at the University of Chicago – distrusts the potential protectionist propensity of Peronist governments, which can became a threat to the negotiation with the EU.

Tensions between the more pragmatic approach of the President and the more ideological and protectionist views of the Vice-President – the former President Cristina Fernández de Kirchner are not helping the implementation of a coherent foreign policy by the new government in office.

– Argentina is interested in buying Russian helicopters. In turn, Moscow views military-technical cooperation as “one of the key elements of a comprehensive strategic partnership with Argentina.” How do you assess the prospects for such cooperation between Russia and Argentina?

– The scope of military cooperation between Russia and Argentina is also dependent of the evolution of the complex economic situation and the resolution of the debt problem.

Previously Argentina [has already] bought helicopters from Russia, which were used in the Antartica by Argentine military, with mixed results. Russia announced negotiations for the deal on a new party of helicopters, but it doesn´t mean that in the short term there will be a purchase of this aircraft or a broader military cooperation.

– MERCOSUR and the EAEU signed a Memorandum of Cooperation in order to expand cooperation between the blocs. What are its prospects?

– As already mentioned, the Memorandum of Cooperation signed by MERCOSUR and EAEU in December 2018 is not showing significant advances, as the priorities of the South American organization are currently aimed at other issues – internal consolidation vis-à-vis the impasse between Brazil and Argentina, and the advancement of the agreement with the European Union. It would take some time and renewed conditions for the Memorandum to take momentum.