Posted on 05/11/2005 9:39:39 AM PDT by Alex Marko
Diplomatic and trade tensions between South America’s two largest countries, Argentina and Brazil, have revealed that their left-leaning presidents, Néstor Kirchner and Luiz Inácio Lula da Silva, are far from being natural allies, as was largely assumed after both men took office in 2003. Buenos Aires’s plans to toughen its negotiating stance with Brasília threaten to exacerbate a growing rift between the two countries and derail regional trade talks.
Mr Kirchner’s has been clearly vexed by Mr da Silva’s recent diplomatic drive to garner Brazil clear regional leadership. “If there is a job in the World Trade Organisation, Brazil wants it. There is a place in the United Nations, Brazil wants it. They even want to name a Brazilian Pope”, the Argentinian president recently said.
Argentina has refused to back a Brazilian candidate for president of the WTO, reminding Brasília of an earlier compromise by several South American countries to support a candidate from Uruguay.
Last year, Lula sent Brazilian troops to head the UN peacekeeping mission in Haiti. The move was perceived as a bid to help Brazil secure a permanent seat on the UN Security Council. Argentina has opposed the enlargement of the Security Council, in effect helping to deny Brazil a permanent seat.
Argentinian officials were also miffed during the political crisis in Ecuador that led to the ouster of its president, Lucio Gutiérrez, in April. Brazil immediately sent its foreign minister there as head of a delegation of the South American Community of Nations (CSN), a recently created geopolitical grouping that Argentinian diplomats see as another vehicle for fortifying Brazil’s leadership in the region. Mr Kirchner did not attend the CSN’s launch last December in Cusco, Peru. His foreign minister, Rafael Bielsa, says the Organisation of American States (OAS) should have addressed the Ecuadorean crisis instead.
The last straw ostensibly was the appointment in late April of Murilo Portugal, a former executive director at the IMF, as deputy to Brazil’s economy minister, Antonio Palocci. Roberto Lavagna, Mr Kirchner’s economy minister, considers Mr Portugal, an orthodox economist, as the person responsible for Brazil’s tepid stance at the IMF during Argentina’s halting negotiations with the Fund. The Brazilian representative’s apparent lack of solidarity with Argentina reportedly prompted Mr Kirchner to ask Lula to remove him, although he stayed in place.
Following the Ecuador episode, Argentina’s Mr Bielsa told his aides that, until then, Argentina had been a “devout partner” of its giant neighbour, aligning itself with Brazil’s interests regionally and globally, while receiving no return benefits. Mr Bielsa currently has three ministry committees forging a new, tougher policy, towards Brazil.
In particular, Mr Kirchner is said to be losing patience with Brasília’s lagging response to Argentinian demands to set up a system of trade safeguards between the two countries to help even out economic imbalances. Argentina has run a continuous trade deficit with Brazil for the past two years. Last March, and in spite of a stronger Real, the gap rose to a record US$334m. Further, Argentinian industrialists say their Brazilian competitors enjoy access to subsidised export financing and demand that the Kirchner government erect trade barriers to protect local manufacturers.
In July of 2004 Argentina imposed restrictions on imports of Brazilian white goods (stoves, fridges, freezers, etc). On April 29th, Argentina’s industry secretary, Miguel Peirano, said that restrictions on shoe imports might follow. Brazil exported 3m more pairs of shoes to Argentina last year than had been agreed between the two countries, he says.
Advancing capital
Argentinian businesses not only fear an invasion of cheaper Brazilian goods, they are also tracking the advance of Brazilian companies making local acquisitions in Argentina. In April, Camargo Correa, Brazil’s fourth-largest cement maker, acquired Loma Negra, Argentina’s leading cement producer, for US$1bn. Since the 2002 peso devaluation that left many Argentinian companies struggling under mountains of dollar debts, Brazilian firms have moved in to largely control key local industries, such as food, steel and energy.
Petrobrás, Brazil’s national oil company, is already the second-largest player in the Argentinian market, having bought the energy division of the local conglomerate Perez Companc three years ago. Brazil’s enhanced status as a top foreign direct investor in Argentina is giving Brazilian industry increased local lobbying power, further complicating Buenos Aires’s efforts to obtain economic concessions from Brasília.
Brazil’s investment position likely will be key to future developments between the two countries. Argentina does not outright oppose Brazilian hegemony, but believes that leadership has its costs. Aside from trade concessions, Argentina wants improved access to some key Brazilian projects in nuclear energy and infrastructure as well as to receive what it deems to be a more balanced share of foreign investment coming into the region.
If Lula and Mr Kirchner agree on satisfying Argentina’s latter demand, the long-lagging, decade-old Mercosur customs union (which also comprises Paraguay and Uruguay as full members) could be suddenly revived. New Mercosur market momentum would bode well for the prospects of a broader South American union, which is Brazil’s intended counterweight to the US-dominated free-trade groupings negotiated with the North American and Central American countries.
Or "Lula" for short.
Well, at least they're not Chavez.
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