A few months into Jair Bolsonaro’s term of office, the European Union suspended negotiations on the agreementit was trying to establish with the Mercosur countries (Argentina, Brazil, Paraguay and Uruguay) because of the intensification of deforestation encouraged by the Brazilian president. The EU does not seem to be as reluctant to sign the agreement under the presidency of Javier Milei, despite the attacks on social rights and the rule of law in Argentina. Negotiations between the two regional blocs, although politically blocked by the electoral context in Europe, are continuing at a technical level. The EU’s chief negotiator, Rupert Schlegelmilch, who visited the four countries of the South American regional bloc last May, even claims to have virtually finalised discussions on the additional instrument [1] designed to give Europe the additional social and environmental guarantees it needs to approve the agreement quickly after the European elections [2].

Will Javier Milei’s political, economic and geopolitical project for Argentina act as a brake or an accelerator on the conclusion of the agreement between the EU and Mercosur ? Some food for thought.

Argentina, a regional power in the throes of profound crises

From a macro-economic point of view, Argentina is a geographical power (the eighth largest country in the world in terms of surface area), a demographic power (the fourth largest population in Latin America) and an economic power (the third largest economy in Latin America, behind Brazil and Mexico). It is endowed with large reserves of oil, shale gas, gold and lithium, making it a key player and economic partner for both the Western powers and China.

However, Argentina is facing a number of crises, not least a worsening economic and social crisis. The country is facing an economic recession (-1,9% in 2023 according to INDEC figures and an IMF forecast of -3,5% in 2024) and a growing budget deficit (5,2% of GDP in 2023), generating uncertainty about the solvency of the State [3]. At the same time, inflation has soared, reaching 211,4% in 2023 compared with 94,8% in 2022 [4], leading to increased food insecurity, widening social inequalities and, above all, more than 50% of the population living below the poverty line [5]. Against this backdrop, Javier Milei is no exception to Argentina’s own political practice, where each new government demonises the previous one and makes a clean sweep of what it has achieved [6].

Javier Milei, ‘the market’ to solve all the country’s problems

It was by exploiting this context of crisis and the rejection of Peronism [7] by a large part of the population that Javier Milei was elected in the second round of the Argentine presidential election on 19 November 2023. His anti-state, ultra-liberal and individualist rhetoric attracted 55,65% of the vote, including votes from a section of the population that benefits little or nothing from state social protection, namely the under-35s.

At the head of his political group ‘La Libertad Avanza’, Milei presents himself as a follower of anarcho-capitalism. This political philosophy challenges the very notion of the State and advocates economic liberalism within the framework of deregulated capitalism, combined with a challenge to political liberalism [8]. For Milei, only a major liberal shock can put the country back on the road to prosperity and attract foreign investment once again. This is why he is calling for drastic cuts in public spending (reducing the number of ministries, cutting public jobs, suspending or closing public institutions and agencies, national media, etc.) and the privatisation of public companies, at the cost of worsening the social conditions of the Argentine population [9].

The omnibus law : radical, anti-democratic and polarising reforms

Argentina’s new president began deregulating all economic activities, dismantling social programmes and restricting individual and collective rights the day after his inauguration on 10 December 2023. Unable to rely on a parliamentary majority to carry out his project by law, he is proceeding with presidential decrees in the face of opposition.

A week after signing a ‘Decree of Necessity and Urgency’ (DNU 70/23) on 20 December 2023, Javier Milei presented a new and even more ambitious deregulation project : the ‘Law of Bases and Starting Points for the Freedom of Argentines’, known as the omnibus law. With its 660 articles, this bill touches on many areas of Argentinean life, such as taxation, pensions, education, culture, security, energy, the distribution of financial resources between the State and the provinces, etc. It also provides for cuts in public services, such as health care and education. Among other things, it provides for cuts in public spending and subsidies, the privatisation of some forty public companies [10] and a reform of labour law (which limits the right to strike, abolishes penalties for irregular contracts and authorises 12-hour working days). In addition, the laws protecting primary forests, indigenous lands and glaciers will be amended to make it easier for foreign investors to acquire land. This bill would also allow Milei to arrogate special powers to himself. Article 1 proclaims a ‘state of emergency’ in economic, financial, fiscal, administrative, social security, tariff, health and social matters for one year, and allows the executive to govern by decree until 31 December 2025.

The omnibus law was passed by Congress on 29 May and by the Senate on 12 June 2024 [11]. Although reduced to 232 articles after suffering a legislative setback in its first draft, the spirit of the law was retained, in particular the delegation of legislative powers to the executive in four key areas (administrative, economic, financial and energy), labour reform (although it was declared ‘unconstitutional’ by a federal court [12]), the privatisation of a dozen state-owned companies, and tax exemptions designed to attract foreign investment. Presented by Milei as ‘revolutionary’, these measures echo those taken in the 1990s under the government of Carlos Menem, which led to the bankruptcy of 2001. They risk accentuating the polarisation of Argentine society and fuelling social tensions. In fact, since President Milei came to power, the country has already seen two general strikes called by the main trade unions (the General Confederation of Labour and the Argentine Workers’ Centre [13]).

The geopolitical stakes : repositioning Argentina on the world stage

By facilitating foreign investment, this omnibus law is also an important milestone in the implementation of Milei’s foreign policy project.« Today, we are adopting the model of freedom, to once again become a world power » [14]. These were Milei’s first words in his victory speech. To achieve this geopolitical objective, the Argentine president has undertaken to realign the country along Atlanticist and Westernist lines [15]. This positioning mainly involves integrating Argentina into international trade and a system of privileged economic alliances with the United States and the so-called ‘liberal’ countries. It involves distancing itself from the South-South cooperation policy pursued under the government of Alberto Fernández, and criticising ‘Lula’s Brazil’ and ‘Communist China’, the country’s main economic, trade and financial partners [16]. At the end of 2023, for example, Argentina refused to join the BRICS+ group [17].

This realignment at international level also includes proactive diplomacy towards the EU and its Member States, particularly in terms of cooperation in the field of mining and raw materials. Argentina is seeking to position itself as a ‘secure and sustainable supplier of minerals’ (lithium, copper, cobalt, etc.) needed for the EU’s energy transition [18]. This explains Milei’s ‘total support’ for the trade agreement between the EU and the Mercosur countries, which he sees as a ‘priority’.

Conclusion : the EU must make the signing of the EU-Mercosur agreement conditional

Milei’s policy seeks to criminalise social protest and destroy any mechanism for preserving the environment and sovereignty over natural resources. The current situation in Argentina is not fundamentally different from that in Bolsonaro’s Brazil in 2019. At that time, the EU suspended negotiations because of the intensification of deforestation encouraged by the Brazilian president. Milei’s political, economic and geopolitical project for Argentina is a sufficient argument to reject the current draft EU-Mercosur agreement. But it is not the only one.

Despite ongoing discussions on the additional instrument, the prospect of implementing the EU-Mercosur trade agreement is worrying on several levels. From an environmental point of view, the expansion of agro-industry and monocultures favoured by this agreement would lead to increased deforestation and the destruction of some of the most crucial ecosystems, not only in the Argentine part of the Gran Chaco but also in the Brazilian Amazon and Cerrado [19].

In social terms, the strengthening of this agro-industrial model would encourage land grabs for large-scale farming and livestock activities, and unfair competition for family farming on both sides of the Atlantic, with no safeguards in place against the risks of agricultural dumping. The expansion of agribusiness is also likely to exacerbate existing abuses of human and social rights, in particular the intensification of the criminalisation of social and peasant movements that is already taking place. In Brazil, for example, the Federal Congress has passed a law (PL 490/2007, Marco temporal) that limits the possibility of land claims by indigenous groups.

From a health point of view, the increase in trade in toxic pesticides across the Atlantic represents a risk for all populations. Between 2018 and 2019, the EU exported almost 7,000 tonnes of pesticides to Mercosur, the use of which is banned in the EU [20]. By reducing customs duties on European chemical exports, the trade agreement would allow European companies to export even more pesticides to Mercosur.

Rather than continuing to negotiate behind the scenes [21], the European Commission should make the signing of the agreement with the Mercosur countries conditional on compliance with essential environmental, social, health and human rights standards. To achieve this, it should at the very least include a sanction mechanism to make the agreement’s chapter on social and environmental standards enforceable, and revise the provisions on public procurement to guarantee the political leeway necessary for Mercosur countries to support their SMEs and develop industrial production capacity [22]. The EU should also apply mirror measures [23] for the trade in chemicals that are harmful to health and the environment, and ban exports of these products from the EU to southern countries, including the Mercosur countries.