To help revive Argentina’s economy and avoid China’s debt-trap diplomacy, Javier Milei needs to revive the Mercosur.

The recent inauguration of libertarian President Javier Milei has ushered in a transformative era in Argentina’s political landscape. In the realm of trade, the new administration has been unambiguous about its stance: no engagement with communist regimes. To bolster diplomatic relationships, Argentina’s top diplomat, Diana Mondino, has embarked on a mission to enhance ties with Western nations, particularly focusing on restoring the strained relationship with the United States, which had deteriorated under the previous left-leaning government of Alberto Fernández and Cristina Kirchner.

Unfazed by potential economic repercussions, Milei has positioned himself as a fervent critic of China, asserting that any negotiations must be conducted through the private sector. To shift the international balance, Argentina must capitalize on a dormant asset: the EU-Mercosur free trade agreement, a legacy of former center-right President Mauricio Macri. Macri was pivotal in recognizing Argentina’s potential for collaboration with Europe, and his charismatic demeanor left a lasting impression on foreign dignitaries. He was also fortunate to host the 2018 G20 summit in Buenos Aires, an event that provided a platform for deepening ties with European leaders, notably Angela Merkel and Emmanuel Macron, who, according to Macri, became enamored with Argentina.

Now, six years after those significant interactions, the global stage has seen profound changes. The emergence of the COVID-19 pandemic has reshaped global productive integration paradigms, where efficiency and cost metrics are now balanced with considerations of security and resilience. Additionally, the geopolitical landscape has been altered by the Russian invasion of Ukraine, compelling Europe to seek new trading partners. Establishing and trading with like-minded countries, a strategy known as friendshoring, substantially mitigates risks. This presents an opportune moment for Europe, as three of the four Mercosur member states (Argentina, Uruguay, and Paraguay) now boast anti-communist governments and are favorable towards the European Union.

Securing the EU-Mercosur agreement would enable European industries to relocate operations to South American countries, thus minimizing exposure to potential risks linked with Russia. However, the benefits extend beyond Europe; Mercosur member countries would gain access to the diverse EU market, increase their export opportunities, and attract foreign direct investment, among other advantages. This “Association Agreement” would create an integrated market of 800 million people, representing nearly a quarter of the world’s GDP, with bilateral trade in goods and services exceeding $100 billion. Such a partnership would result in a significant boost in job creation, thereby fostering economic development across the participating regions.

While the positive aspects are numerous, it is important to acknowledge the challenges. In Europe, especially in France, the agreement has encountered opposition from farmers who contend that competing with Argentina and Brazil’s highly efficient agricultural sectors would be untenable. Notably, negotiations have extended over 22 years, with Mercosur awaiting decisive action from the European Union, fueling impatience among South American leaders like Uruguay’s President Luis Lacalle Pou, who is now initiating dialogue with China for potential trade agreements. Similarly, Brazilian President Lula da Silva has taken steps in this direction, aligning with Brazil’s membership in the BRICS alliance.

The urgency for Europe to achieve consensus regarding this collaboration cannot be overstated. Failure to do so could have significant ramifications for Europe’s future in the global economy. Additionally, there is no certainty that Mercosur governments will remain open to negotiations with the EU indefinitely. Argentina plays a pivotal role in this agreement, particularly since Javier Milei terminated the country’s involvement in BRICS, a move initiated by Alberto Fernández. Beyond its clear economic benefits, this partnership is significant in the reaffirmation of Western values and in addressing the economic and political influence of China and Russia, not only within Mercosur but across Latin America as a whole.

Carl Moses, an advisor and analyst specializing in South America, voiced his concerns in an interview with DW, stating, “Every day, new nails are hammered into the coffin of the treaty. The absurdity lies in the fact that, within the European Union, the majority of experts are convinced that Europe urgently needs the agreement more than South America. Despite this, Europe is not taking action.” He also highlighted a complaint raised by Greenpeace, an organization warning that this treaty could lead to an increase in commercial and maritime transportation, potentially harming the climate. This objection is self-serving and fails to realistically assess the economic situation. Argentina, Paraguay, and Brazil have high levels of poverty and unemployment, which could be alleviated by this treaty, enabling the creation of millions of new jobs and consequently improving their socioeconomic conditions.

The fate of this treaty rests on the European Union as a collective entity, and all indications suggest that this may be its final opportunity to secure Mercosur’s support. China and Russia have shown greater agility and adaptability in concluding negotiations, resulting in substantial advancements across Asia, Africa, and Latin America. However, this also translates to a spread of their ideologies and heightened support for them. It is high time for Europe to make a definitive decision and cease further delays on a matter that has lingered on the negotiation table for over two decades.