The election of the far-right anti-establishment candidate Javier Milei in Argentina’s second round ballot on 19 November poses a number of tricky problems for the Brazilian government and President Luiz Inácio Lula da Silva’s (a.k.a. Lula). The first is that both men are deeply rooted ideological enemies. Lula has always been a man of the left. On the other hand, Milei can be considered the latest in a wave of western hemisphere far right populists, which began with Donald Trump in the US (2017-2021), and continued with Jair Bolsonaro in Brazil (2019-2023). During his term Bolsonaro welcomed Lula’s conviction and imprisonment on corruption charges which were later thrown out by an appeal court. In Lula’s eyes on the other hand, Bolsonaro and his allies conspired with military officers to try and overturn the results of last year’s elections. For some, the crude political logic is that Milei, the friend of Lula’s sworn enemy, must by extension also be the sworn enemy of Lula.

The two have made matters more difficult for future constructive engagement by trading insults at various points over the last six months. During the election campaign Milei said that, if elected he would not meet Lula because he considered his Brazilian counterpart to be ‘a communist and a crook.’ Traditionally, the first foreign visit by an Argentine president-elect is to Brazil but this precedent was broken in 2019 when Bolsonaro was in office and may now be broken again. Meanwhile Lula has not spared his attacks on Bolsonaro which are also seen as attacks on the ‘new right’ ideas favoured by Milei.

The Brazilian economy is 4-5 times larger than that of Argentina but the latter is nevertheless Brazil’s most important regional trade partner and — together with Paraguay and Uruguay — a fellow member of the Mercosur economic block. Milei will take office as Mercosur is making what its leaders see as a last-ditch attempt to finalise a long-term free trade agreement (FTA) with the European Union. In early October negotiating teams said they would meet weekly in an effort to finalise the FTA before the end of the year. But, with Milei due to be sworn-in on 10 December, it is hard to see that deadline being met. Milei’s radical promises — to dollarise the economy; close down the Central Bank; and cut government spending by around 15% — could create both political and financial turmoil with spill-over effects potentially impacting Brazil. 

Although Brazil has the largest diplomatic clout because of the size of its economy, politically it is now in a minority within Mercosur because all the block’s other members are either of the centre-right or the far right. Milei has said that Argentina would withdraw entirely from Mercosur but it is unclear whether he will actually stick to that promise. He has also described Mercosur as a ‘customs union that favours businessmen who do not want to compete, which goes against Argentina’s interests.’ More recently he has spoken of making Mercosur more ‘competitive.’ Because of this uncertainty the Brazilian administration is finding that the road map towards greater free trade and increased global competitiveness is currently looking somewhat murky. 

Given this background it is unsurprising that Lula’s first responses to Milei’s victory have been cautious. In an official statement which did not mention him by name, Lula said ‘democracy is the voice of the people and must always be respected’, and added his wishes that the new Argentine government should enjoy ‘good luck and success.’ The message also stated that ‘Argentina is a great country and deserves all our respect. Brazil will always be ready to work with our Argentine brothers.’ In earlier comments before polling day he had said that Argentina should have a president who ‘likes democracy, respects institutions, likes Mercosur and South America, and believes in building a significant block of countries.’ Milei clearly does not fully fit that profile because of his hostility to Mercosur and preference for Argentina to ‘go it alone’ on free trade. 

The November 2023 issue of Brazil Focus also includes the following:

• Politics
• The ebbs and flows of the political right
• Implications
• Taking the pulse
• Lula vetoes indigenous land rights bill

Foreign Relations

• Milei’s victory in Argentina poses issues for Lula
• Controversy over suspected Hezbollah activity

Security

• Military sent into ports and airports

Economy & Business

• Uncertainty over fiscal target 
• Nominal deficit still widening
• Tax reform bill passed by the Senate
• Economic growth begins to slow
• Good news on inflation – for now
• Nissan seeks to double auto market share
• Retail: piracy issues loom large in e-commerce 

Energy Sector

• Power cuts hit São Paulo
• Petrobras lowers the bar for political appointments