Newly elected Alberto Fernandez after winning the presidential elections, in Buenos Aires, Argentina, October 27 2019. Picture: AMICAR ORFALI/GETTY IMAGES
Newly elected Alberto Fernandez after winning the presidential elections, in Buenos Aires, Argentina, October 27 2019. Picture: AMICAR ORFALI/GETTY IMAGES

Brasilia — The election of Peronist Alberto Fernandez in Argentina, whom Brazil's right-wing President Jair Bolsonaro has called a "red bandit", sets the stage for a run-in between South America's two biggest economies that could derail their Mercosur trade bloc.

 Fernandez swept into power on Sunday, ousting conservative leader Mauricio Macri in an election result that shifts Latin America's No 3 economy firmly back towards the left amid an  economic crisis and rising debt fears.

Bolsonaro said in Abu Dhabi on Monday that Argentine voters had made a mistake and he had no intention of congratulating Fernandez for his win on Sunday.

The immediate hostility highlighted sharp ideological lines reappearing in Latin American elections. Centre-left Fernandez's victory, along with 2018's win by leftist Andres Manuel Lopez Obrador in Mexico, mark an end to market-friendly reforms in both countries, leaving conservatives in Chile, Colombia and Brazil more isolated.

Brazil-Argentina relations have been cordial and constructive since both shed military rule in the 1980s, despite traditional tensions in geopolitics and on the soccer field.

Mercosur

Although they compete in global grains and beef markets, Mercosur, which includes Uruguay and Paraguay, has fostered a healthy exchange of cars and other manufactured goods, making Brazil the top trade partner of Argentina.

As both economies sputter, however, their presidents may find it tempting to play to their bases, antagonising ideological foes and playing up their differences over red-button issues such as Cuba and Venezuela.

 Argentina's president-elect posted a Twitter message calling for the release of Brazil's former leftist president Luiz Inacio Lula da Silva, who was jailed in 2018 for a bribery conviction.

The tweet riled Bolsonaro. "The first thing Fernandez did was to post 'Free Lula' saying he was unfairly jailed. So we can see where he is coming from," Bolsonaro said.

Fernandez, a trade protectionist, has vowed to pull out of Mercosur.

Bolsonaro said on Monday that his government will wait to see what position Fernandez takes once he assumes the presidency in December.

"Let's see how he behaves," Bolsonaro said, adding: "I hope Argentina does not change its course on trade."

Foreign policy and trade experts say the two economies are too interdependent to entirely break up Mercosur.

The greater threat may be to a trade deal between Mercosur and the European Union, which has taken two decades to negotiate and is facing resistance in European countries.

"The relationship between Argentina and Brazil will, at best, be cold for the next three years," said Welber Barral, a Brasilia-based consultant and former trade secretary.

He said, however, that industrial groups on both sides will try to "appease" the governments in an effort to insulate their exports and the EU-Mercosur agreement.

In Buenos Aires,  Fernandez arrived at the presidential palace  on Monday for a meeting with outgoing incumbent  Macri. 

Fernandez faces a major challenge to revive Argentina's economy, mired in recession for much of 2018, while fending off a rising mountain of debt payments amid concerns the country may be forced into a damaging default.

Investors, who have been following the twists and turns of the election closely, will now be on the lookout for signs from Fernandez about his likely economic policies and the make-up of his economic team.

Reuters