Lula’s return in Brazil opens window of opportunity for Argentine infra

Luiz Inácio Lula da Silva’s return to the presidency in Brazil offers Argentina an opportunity to develop its trade infrastructure and reset the relationship between the two nations, which has deteriorated in recent years, according to Buenos Aires-based economic think tank CEPA.

Lula held his first meeting with his Argentine counterpart Alberto Fernández on Monday, prior to the summit of the community of Latin American and Caribbean states (CELAC), being held this week in the Argentine capital.

During Lula’s previous terms as president (2003-11), which coincided with the first half of the Kirchners' presidencies in Argentina (2003-15), the relationship between Brazil and Argentina was defined by the growth of bilateral trade and “strong regional integration,” according to a CEPA report.

The relationship cooled off after Lula’s departure and began to deteriorate further after Jair Bolsonaro assumed the presidency in 2019, to the point that Brazil was displaced by China as Argentina’s main trading partner in 2020.

CEPA said that this was caused by the Bolsonaro government's poor international reputation, the effects of the COVID-19 pandemic on international trade and the changes in production policy in Argentina following Fernández's victory in late 2019.

Lula’s return, however, already augurs well for Argentine infrastructure. Earlier this month Argentina’s ambassador to Brazil, Daniel Scioli, gave details of an agreement that Lula and Fernández will seal this week.

That agreement will include financing from Brazilian development bank BNDES for the second stage of the Néstor Kirchner gas pipeline, as well as measures to boost trade between the two nations.

On this front, CEPA stated that a rejuvenated relationship between Brasilia and Buenos Aires opens the door to improvements in trade-related infrastructure too. 

Nevertheless, CEPA head Hernán Letcher told BNamericas that there are no confirmed projects for bilateral infrastructure on the agenda just yet, although Brazil and Argentina are currently building a US$40mn international bridge over the Uruguay river. 

Argentina’s infrastructure sector is also facing a difficult start to the year following the volatility in costs of construction materials and financing problems last year. Companies focused on public works are predicting that activity will remain the same or even decline further in the first few months of 2023. 

At the same time, the window of opportunity for Argentine may be short lived, as the country will hold general elections this year and the ruling Frente de Todos coalition is facing an uphill battle, polling well behind the center-right Juntos por el Cambio coalition and it is unclear whether Fernández will even run for reelection.