The European Union and Brazil, two of Argentina’s most significant trading partners, are currently assessing the implications of recent statements made by Argentine President Javier Milei. During the inauguration of the 143rd regular session of Congress, Milei stated that Argentina should be willing to “flexibilize, even to the point of leaving Mercosur,” arguing that the trade bloc has primarily benefited Brazilian industrialists at the expense of Argentina.
Key Trading Partners at Stake
Brazil plays a crucial role in Argentina’s trade, accounting for 17% of its exports and being the primary buyer of Argentina’s automotive industry products. Simultaneously, in December 2023, Mercosur and the EU reached a trade agreement after 25 years of negotiations. However, this agreement still faces a rigorous ratification process. Given these circumstances, Argentina’s major trade partners must now reconsider their future dealings with Milei’s administration.
The Mercosur trade bloc, comprising Argentina, Brazil, Uruguay, and Paraguay, is economically significant, housing a market of 295 million people. The region is a major food producer, making it strategically important in an era of global geopolitical instability. Additionally, Mercosur holds valuable resources such as energy and minerals, which further enhance its economic appeal.
Challenges and Potential Reforms in Mercosur
According to Mercosur’s statutes, the bloc aims to facilitate the free movement of goods, services, and productive factors among member nations by eliminating tariffs and trade restrictions. However, intra-bloc trade has room for expansion and improvement.
Uruguay has previously clashed with Mercosur over its intention to sign a free trade agreement with China. Similarly, at the latest Mercosur summit in December 2023, Milei advocated for increased openness, enabling members to pursue independent trade agreements with third-party nations.
Trade Balance and Economic Figures
Data from Argentina’s National Institute of Statistics and Censuses (INDEC) reveals that in 2024, Argentina’s trade with Mercosur resulted in a deficit of $1.329 billion, the second-largest after China. Exports to Brazil amounted to $13.611 billion, accounting for 79.3% of Argentina’s regional exports and 17.1% of its total global exports. Meanwhile, imports from Brazil represented 77.6% of Mercosur imports and 23.6% of Argentina’s total imports.
Trade with the European Union also presented challenges, with a trade deficit of $747 million in 2023. While Argentine exports to the EU increased by 20.1% to $8.239 billion, imports decreased by $1.715 billion to $8.986 billion. The EU accounted for 10.3% of Argentina’s total exports and 14.8% of its imports.
Mercosur vs. the European Union
Trade expert Marcelo Elizondo highlights the significant economic disparity between Mercosur and the EU. The European Union represents nearly 20% of the global economy, with a population of 450 million and a per capita income of $60,000. It contributes 15% of the world’s international goods trade and 22% of global services trade. In contrast, Mercosur has a per capita GDP of approximately $10,000 and accounts for only 1.5% of global trade.
Despite Argentina’s trade deficits with both Brazil and the EU, these regions remain crucial export destinations. Many of Argentina’s imports from these areas consist of industrial goods essential for domestic production.
The Role of the United States and Tariff Reforms
Mercosur faces structural inefficiencies, including high tariffs averaging 13% on foreign products. In comparison, the global average tariff is 5.9%, making Argentina’s tariffs 88% higher than the global standard. According to consultancy firm BiGlobal, reducing these tariffs and allowing bilateral trade agreements outside of Mercosur could enhance the bloc’s global competitiveness.
President Milei has advocated for greater market openness, arguing that liberalizing trade policies would allow Argentine businesses to access international markets more effectively. “It is unfair that only those who can afford to travel abroad can purchase goods at international prices. This opportunity must be available to everyone,” Milei asserted in Congress.
He further emphasized the importance of establishing a trade agreement with the United States, describing it as a historic opportunity. However, such a move would require significant Mercosur reforms. As BiGlobal’s director Marisa Bircher explains, adapting Mercosur’s regulations would enable member countries to respond more effectively to global market demands while maintaining regional economic cohesion.
Argentina’s trade policy is at a crossroads under Milei’s administration. His push for greater flexibility within Mercosur, combined with efforts to forge independent trade agreements with global powers such as the U.S., has introduced uncertainty into Argentina’s relationships with key trade partners. The future of Argentina’s position within Mercosur and its trade agreements with the EU will depend on whether Milei can successfully implement his vision of a more open and competitive economy while balancing the interests of domestic industries and regional alliances.