The Paths of Brazil–Argentina Productive Integration Under Neoliberalism: Origins and Current Challenges

Abstract

The objective of this article is to analyze the productive integration between Brazil and Argentina and its current challenges. The theoretical foundations of productive integration are examined by means of a presentation of the theoretical framework of ECLAC structuralism and contemporary interpretations. The analysis proceeds by presenting quantitative and qualitative economic data on productive integration between Brazil and Argentina. It is argued that the lack of political coordination and the boycott by liberal governments of the productive integration between the countries from the second half of the 2010s contributed to the deepening of the already existing technological and competitive gap in the industries of both countries, making recovery and planning difficult. The liberal turn of this period is based on the assumption that integration into the value chains of countries at the center of capitalism would bring more benefits than integration aimed at regional value chains.

Keywords

Mercosur productive integration ECLAC structuralism Mercosur–European Union Agreement global value chains

Introduction

The productive integration between Brazil and Argentina contributed to the political and economic rapprochement between the two countries after their respective military dictatorships ended and to the strengthening of Mercosur. This integration, however, has its contradictions and has been negatively affected by the “commercial” strategies for Mercosur (Briceño Ruiz, 2018) of the liberal governments of Michel Temer (2016–2018) and Bolsonaro (2019–2022) in Brazil and Mauricio Macri (2015–2019) and Javier Milei (2023–2027) in Argentina. These strategies have focused on opening up trade and seeking asymmetric trade agreements, leaving regional productive integration in the background (Bastos, 2017; Reis & Berringer, 2018). The present study aims to present a history of productive integration, focusing on the automotive industry, between Brazil and Argentina and discuss the current challenges related to this process.

This article is divided into three sections. First, we discuss the theoretical approach of the Economic Commission for Latin America and the Caribbean (ECLAC) and contemporary interpretations. Second, we present a history of productive integration between Brazil and Argentina and its political and economic effects. Third, we discuss the current challenges to productive integration between the two countries in the context of the return of the Workers’ Party (PT, Partido dos Trabalhadores) to the presidency in Brazil, the election of the ultra-liberal Javier Milei (2023–2027) in Argentina, and the renegotiation of the Mercosur–European Union (EU) Agreement.

ECLAC Structuralism and Contemporary Interpretations

ECLAC Structuralism

In 1949, the Argentine economist Raúl Prebisch launched a pioneering study outlining some of the structural problems of the Latin American economy. The text would become known as the “Manifesto of ‘49” (Mallorquín, 2012). In this document, Prebisch challenged the traditional scheme of the international division of labor in which peripheral countries exported primary products and purchased industrialized products from the central nations of the world economy. Prebisch believed that the premise of classical theory, according to which technical progress would spread evenly across the different regions of the globe through international trade, had been unequivocally contradicted by the facts (Prebisch, 1949).

Prebisch understood that the periphery of the system could only capture technical progress through industrialization, and he openly called for this. This would not mean the end or even the reduction of primary product exports, as this was essential to attract resources with which Latin America could import machinery. Another source of resources was foreign direct investments (FDI), but it had to be received with strict selectivity. The remittance of profits from these investments could further weigh down the balance of payments in a region that was already suffering from a shortage of dollars. Therefore, investments had to concentrate on productive activities that would benefit the economy as a whole. Another adjustment had to be made to the structure of the workforce. The absorption of technical progress by agriculture would free up a large contingent of labor, which would have to be absorbed by industry and other activities.

But the manifesto’s main intellectual contribution was the theory of the deterioration of the terms of trade. This theory recognized that, in the growth period of capitalist cycles, the price of primary products grows faster than that of industrialized products, which initially favors the periphery. However, in the center, during this same period, there is an increase in the remuneration of productive factors. Although apparently in contradiction with the reduction in costs caused by technical progress, this was seen as a result of the lobbying power of social organizations (especially trade unions) in these countries. In times of recession, these same organizations would not allow the reduction of factor remuneration, which would then be transferred to the primary-export producers of the periphery. In a full-cycle analysis, Prebisch observed that the prices of primary products fell in relation to those of industrialized products.

An indispensable element for the success of the industrialist strategy proposed by Prebisch was some level of state protection, especially customs protection (Prebisch, 1973). This would be justified by the difference in productivity between countries and should be kept at a limited level so as not to generate and protect inefficient industries. Excessive restrictions on imports, however, could have adverse effects on international trade.

Prebisch and ECLAC identified an important obstacle to achieving the proposed objectives: scale. It was in response to this obstacle that the issue of economic integration became part of the broader theme of development in the region. In his words:

Another limit is given by considerations related to the ideal size of industrial companies. Latin American countries generally try to develop the same sectors on one side of the border as on the other…. The possibility that an important part of the fruits of technical progress will be wasted due to the excessive fragmentation of markets is therefore another limit to industrial development in our countries. But far from being insurmountable, it is one of those that an astute policy of economic interdependence could eliminate with great reciprocal benefit. (Prebisch, 1949, p. 12, translation added)

On the subject of integration, in 1958, the ECLAC Trade Committee set up a working group for the Latin American Common Market (MCLA, Mercado Comum Latino-Americano). A year later, Prebisch outlined the general lines of the proposal.

The fragmentation of industry was not considered a problem in the first decades of the twentieth century, when consumer goods industries spread throughout Latin America as part of the scheme known as Import Substitution Industrialization. However, when attempts were made to move toward more elaborate capital goods industries, the problem of national protectionism became evident (Prebisch, 1959).

The aim of integration was not the total liberalization of trade, but to bring the productive sphere into the MCLA (Briceño Ruiz, 2012; Prebisch, 1949). The proposal was for a first phase lasting ten years, in which there would be three types of liberalization, depending on the sector. For primary products, the tariff reduction should be total; for the capital goods industry, substantial; and for the consumer goods industry, reduced. This was because the consumer goods industries were those already established in the region and therefore opening them up represented a risk of unemployment. No recommendations were made after the first ten years. What was advocated was that, after this period, there should be an evaluation of the results and then proposals for the second stage.

Prebisch considered it essential that this whole process maintained a margin of flexibility for governments. The agreed tariff reductions would represent averages but could be higher or lower depending on the sector and national decisions. The issue of asymmetries also played an important role. Countries with lower relative development would have longer deadlines than others to promote tariff reductions. They would have to import their capital goods from the more dynamic countries. However, in return, the countries producing capital goods would have to make special concessions to the least developed countries, which would not extend to the other MCLA members. The issue of reciprocity was also relevant: accordingly, if a country in the bloc had a persistent surplus with the others, it would have to speed up its opening.

Updating the Theory: Internationalization of Production and the New Division of Labor

In more recent years, Enrique Arceo (2009) returned to the problem of economic regionalization by focusing on the formation of “blocs.” Strictly speaking, Arceo did not formulate a theory of regional integration, but the theme of economic regionalization has occupied an important place in his reflections. When using the term “blocs,” he does not refer to institutionally created economic blocs, or the formation of preferential trade regulatory frameworks, but rather to quantifiable trade flows that, once mapped, point to the centrality of the concept of region in the current international economic system. Through quantitative trade sources, Arceo has indicated the existence of three blocs (although not limited to these) led by the United States, the European Union, and East Asia. This formulation does not deny that there are movements in the legal-normative construction of these blocks; although not limited to institutional arrangements, these blocs are political constructions and not the result of free economic flows.

It is interesting to note that, although the overwhelming majority of Latin American countries have been absorbed by the bloc led by the United States, taking trade flows as a parameter, Mercosur and, surprisingly, Chile are not an integral part of any of these blocs.

Each of these blocks has its respective centers and peripheries. Its centers have transnational bourgeoisies that operate economically throughout their respective regions and, to a lesser extent, across the globe. The domination of these bourgeoisies cannot be seen as something immediate and mechanical, the result of a supposed globalization that would have relegated national powers to irrelevance. Transnational capital, to exercise extraterritorial power in relation to its country of origin, needs to act as a fraction of each national power bloc. Thus, Arceo’s formulation is in agreement with Berringer’s (2014) thesis that domestic dynamics influence international action: in addition to the local associated-comprador bourgeoisie, which in fact exists, the transnational bourgeoisie itself makes up the historical bloc of dependent countries. Today, specifically, the class fraction that holds hegemony is US financial capital.

Analyzing the economic structure of each part that makes up the blocks, Arceo affirms the validity of the concepts of center and periphery. The distinction between these categories remains in force today in industry. Thus, “the industrial system is the material support that allows productive capital to guide the development of productive forces” (Arceo, 2009, p. 82, translation added).

Arceo is no stranger to the productive fragmentation that industrialized the periphery. In the twenty-first century, 70% of exports from peripheral countries are manufactured products. However, in countries without their own industrial system, it is the bourgeoisie of central countries that determines which activities can be replicated. This subordinate and dependent form of industrialization, more than breaking with comparative advantages, reinforces them, since the advantage attributed is to cheap and abundant labor, while activities intensive in capital and technology continue to be carried out exclusively in the headquarters of these transnational companies.

The transfer of labor-intensive production stages, which previously took place in the center, has resulted in cheaper manufactures produced in the periphery, while the manufactures that remain monopolies in central countries have increased in value. This generates a new deterioration in the terms of trade, of a different nature from that presented by Prebisch (1949). Statistics in Asia indicate that the increase in a country’s income is no longer restricted to the migration of the workforce from agriculture to industry but also includes diversification within the industry. The new international division of labor no longer refers to the dichotomy between primary and manufactured products, but to the role that each country occupies in the industrial process (Reis & Cardoso, 2019). The peripheral condition is no longer related to the existence of an industrial park within its territory, but to the effective control over this industrial park.

Today, Latin America suffers from a two-fold integration in the international economy. There are regions that remain in the old international division of labor, especially South America, and others that have entered the new one, of which the best example is Mexico. Politically, the power bloc in most of the region is made up of a local primary-export bourgeoisie and transnational capital from the financial and commercial spheres. Especially in the Southern Cone, the agrarian bourgeoisie has such strength that they compete with their equivalents in the center, and are able to stop the transformations proposed by left-wing governments, since, even in the latter, they never stopped being part of the bloc in power, even if not with the broad hegemony that they enjoy in conservative governments.

History of Productive Integration in Mercosur

The seed for productive integration between Brazil and Argentina emerged in the 1980s with the Economic Integration and Cooperation Program (PICE, Programa de Integração e Cooperação Econômica), of 1986, and the Integration, Cooperation and Development Treaty (TICE, Tratado de Integração, Cooperação e Desenvolvimento), of 1988. These initiatives reflected the intention, still in accordance with structuralist theories (Damásio, 2021), adopted during the government of Sarney in Brazil (1985–1990) and Alfonsín in Argentina (1983–1989), to create a regional space that would reduce the countries’ asymmetries in relation to developed countries and bring them closer together after years of mutual distrust. Despite the interest in productively integrating both countries through state intervention, the creation of the Common Market of the South (Mercosur) in 1991 took place in a context of advancement of neoliberal ideas related to the Washington Consensus, in which the bloc’s regional policy focused primarily on issues of a commercial nature, seeking to take advantage of the comparative advantages of member countries. Domestically, Brazil and Argentina faced economic problems related to monetary and exchange rate stabilization in the period, with emphasis on, respectively, the Real and Cavallo Plans.

Mercosur in the 1990s, reflecting the interests of the Brazilian and Argentine financial and export-oriented bourgeoisies (Berringer, 2014), adopted a model of international integration called “open regionalism,” in which “competitive integration” of member countries was sought through commercial openness (Berringer, 2017) and political and economic subordination to the interests of the center of capitalism (Botão, 2022). These countries’ positions in the period contrasted with the initial intentions of productive integration contained in the PICE and TICE (Granato, 2016), preventing them from advancing significantly in the period. Nonetheless, the free-trade area created by Mercosur, added to the imperfect Customs Union, established in 1994, increased trade between Brazil and Argentina, with emphasis on the exchange of manufactured products.¹

The Mercosur Customs Union enabled Brazil to counter the advancement of the Free-Trade Area of the Americas (FTAA) by using negotiations within the scope of the World Trade Organization relating to a free-trade agreement with the Europeans as a means of bargaining (Thorstensen, 2001). This strategy made it impossible for Carlos Menem’s Argentine government to use Mercosur as a preparatory stage for integration into the FTAA (Granato, 2020).

Factors such as commercial re-primarization, the Brazilian exchange rate crisis, the Argentine economic deterioration at the turn of the twenty-first century, and the threat posed by the FTAA led sectors of the business community in Brazil and Argentina, notably parts of industry and agribusiness, to present resistance to the neoliberal model in force until then (Berringer, 2014; Granato, 2016; Sanz Cerbino & Grimaldi, 2020; Treacy, 2019). This resistance enabled the creation of political fronts with the progressive governments of the Workers’ Party, as is the case of the so-called Neodevelopmentalist Front in Brazil (Boito, 2012), and the Justicialist Party, represented by the Kirchnerists (Sanz Cerbino & Grimaldi, 2020). Figure 1 showing the history of the trade balance between Brazil and Argentina from 1989 to 2023.

Figure 1.

Source: Own elaboration, based on ComexStat data (Brasil, 2025a).

Furthermore, Mercosur turned more decisively toward institutionalization at the turn of the century, undertaking measures such as the Ushuaia Protocol, also known as the democratic compromise among Mercosur members, in 1998; Decision 32/2000, which obliges Mercosur member countries to negotiate trade agreements jointly; talks about a possible merger between Mercosur and the Andean Community within the scope of Initiative for the Integration of South American Regional Infrastructure (IIRSA); and the creation of the Mercosur Permanent Review Court through the 2002 Olivos Protocol. This institutionalization can be understood as the beginning of a multifaceted regionalism in Mercosur (Ferraz, 2021; Kfuri, 2015) and laid the foundations for future initiatives of productive integration.

The arrival of the PT and Kirchnerists to power made it possible to implement measures aimed at productive integration, such as the Buenos Aires Consensus of 2003, the Mercosur Work Program 2004–2006, and the creation of FOCEM (Fund for the Structural Convergence of Mercosul), in 2004. In 2006, the 30th Mercosul Summit prioritized the creation of activities for productive chains among small and medium-sized companies (Granato, 2016). In addition to mutual government initiatives, employers in both countries deepened inter-company cooperation. These measures created the basis for the launch, in 2007, of the Productive Integration Program and, in 2008, of the Productive Integration Group (GIP), and contributed to productive integration in sectors such as automotive, metal-mechanical, petroleum gas, aerospace, energy, and wine sectors (Granato, 2016; Treacy, 2019).

Among these sectors, the automotive sector represents the highest degree of integration and intra-regional exchange, with 85% of intra-industrial trade within it (Damásio, 2021) and encompassing automotive terminals, automakers, and auto-parts manufacturers, being led by multinationals of foreign origin, most of them headquartered in the center of capitalism (Treacy, 2019). This sector is organized by a trade regime differentiated from the rest of the bloc’s other sectors, known as Mercosur’s Common Automotive Policy (PAM), which establishes minimum criteria for productive integration between Mercosur members and import tariffs on extra-bloc vehicles (Treacy, 2019). It is worth highlighting that the internationalization of production observed in the automotive sector is part of the neoliberal context of transnationalization of commodity production, as already evidenced by other authors (Arrighi, 1997; Hymer, 1978; Suwandi et al., 2019). It has made use of integrationist initiatives within the scope of Mercosur to expand its value chains in the region, whereby Brazil specializes in the regional management of multinationals’ activities and in the manufacture of small car models, but with a greater scale of production, while Argentina specializes in the production of medium-sized and utility cars (Treacy, 2019).

As an example of asymmetric integration, around 55%–60% of the cars used in Argentina are of Brazilian origin, while in Brazil, only around 6%–7% of the cars used in the country are of Argentine origin (Treacy, 2019). Furthermore, there is dissatisfaction regarding access to the most sophisticated activities of the production process, which continue to be concentrated in Brazilian headquarters and branches,² and the replacement, by multinationals, of small and medium-sized local input supply companies by international subsidiaries (Treacy, 2019). The characteristics of this sector are summarized in Table 1.

Table 1.

Characteristics of the Automotive Sector in Mercosur.

Characteristics	Brazil	Argentina
Position in the value chain	Regional management of the multinationals and vehicle assembly plants	Vehicle assembly plants
Scale	Greater production scale	Smaller production scale
Type of manufacturing	Small passenger cars	Medium-sized and utility vehicles
Technological concentration	Concentrated in the multinational branches and subsidiaries	Concentrated in the subsidiaries

Source: Own elaboration, based on Treacy (2019).

Overall, however, productive integration between Brazil and Argentina, especially in relation to the automotive sector, was fruitful in the period between 2002 and 2015 (Granato, 2016; Treacy, 2019).

Commercial exchange between Brazil and Argentina reached its peak in 2011 and has shown a downward trend since then. Among the explanations for this phenomenon, we can highlight (a) the effects of the 2008 crisis; (b) the fall in commodity prices; (c) the “exhaustion” of Kirchnerist economic policy, with the subsequent economic slowdown in Argentina; and (d) increased competition from manufactured goods of Chinese origin in the region. These factors led industries in both countries to seek integration into the value chains of countries at the center of capitalism to the detriment of regional productive integration (Bastos, 2017; Sanz Cerbino & Grimaldi, 2020).

With the rise to the presidency of Michel Temer in Brazil (2016–2018) and Mauricio Macri in Argentina (2015–2019), foreign and domestic policies changed direction toward a liberalizing process. Externally, both countries began to seek rapprochement with the central countries of capitalism (Botão, 2022), the conclusion of the Mercosur–EU Agreement, entry into the Organization for Economic Cooperation and Development (OECD), the attraction of foreign capital, and the constitution of a “commercial” Mercosur (Briceño Ruiz, 2018), in order to undermine the bloc’s productive integration and political and social multidimensionality initiatives (Berringer, 2017; Botão, 2023a; Ferraz, 2021). Domestically, fiscal austerity policies were adopted that repressed the countries’ internal markets, deepening their processes of decay and industrial dependence (Reis & Berringer, 2018; Treacy, 2019).³

The automotive sector, the main vector of the productive integration process between Brazil and Argentina, is among one of the most affected by the technological advances caused by the Fourth Industrial Revolution, with Brazil failing to catch up from the Third to the Fourth Revolution (Yamauchi et al., 2023). Thus, an important portion of the industry lags behind its competitors, especially those located in East Asia (Reis & Cardoso, 2019). This scenario may explain the interest of the industry, notably the Brazilian one, in the promise of attracting FDI following the conclusion of the Mercosur–EU Agreement and entry into the OECD. A “political agreement” with the Europeans was signed in 2019, with terms that were very harmful to the Brazilian industry and that could threaten the already weakened regional integration between Brazil and Argentina (Schutte, 2024).

The emergence of the coronavirus pandemic in 2020 disrupted production and transport chains, caused a shortage of semiconductors needed for the automotive industry, and encouraged central countries to adopt strategies for returning production units to their states of origin (reshoring) (De Conti et al., 2023; Yamauchi et al., 2023). These factors made it difficult, for example, to implement the Brazilian Rota 2030 automotive industry incentive program (Yamauchi et al., 2023). In addition to discussions about reshoring, central countries, due to the pandemic, the war in Ukraine, and the intensification of the geopolitical dispute between the United States and China, have also discussed the installation of production units in closer locations (nearshoring), raising a new element in discussions about productive integration.

Current Challenges

The history of productive integration between Brazil and Argentina discussed in this article leads us to discuss the current challenges that emerge. Among these, we may highlight (a) the deepening decadence and dependence on the productive structure of the countries; (b) slow domestic markets; (c) pressure for the conclusion of the Mercosur–EU Agreement; (d) and the government of Javier Milei.

In order to halt the process of technological obsolescence in industry and increase productivity, the new Lula government (2023–2027) adopted industrial policies aimed at investing in research and development and the modernization of industrial plants. Examples of initiatives proposed by the new government are the institution of the Green Mobility and Innovation program (MOVER, Programa de Mobilidade Verde), which provides incentives for the automotive industry to carry out research and production of electric vehicles and relocate industrial plants from other countries to Brazil (Moliterno, 2024). This program is part of the larger New Industry Brazil (NIB, Nova Indústria Brasil) plan, officially launched in January 2024, which foresees investments of R$300 billion, equivalent to US$50 billion, divided into R$271 billion in credit, R$21 billion in nonrefundable amounts, and R$8 billion in equity (Máximo, 2024). The result of these industrial policies is a total of US$16, 5 billion in investments in the Brazilian automotive sector.⁴

Another industrial policy adopted by the Brazilian government, within the framework of the NIB, is called Accelerated Depreciation and consists of tax incentives for the modernization of capital goods in industry with a view to inserting it into Industry 4.0. The NIB completed its first year with R$3.4 trillion (or US$580 billion) in investments in Brazilian industry, divided into R$1.2 trillion in public investments, R$2.2 trillion announced by the productive sector, and R$384 billion by the NIB’s More Production Plan (Plano Mais Produção) (Brasil, 2025b).⁵

Although they could modernize industrial plants and insert the Brazilian automotive sector into the production chains of hybrid and electric vehicles, these investments could accentuate the existing asymmetries between Brazil and Argentina⁶ due to the absence of an Argentine industrial policy, with Milei preferring to promise a broad tax cut and an increase in the tax autonomy of the provinces. The spillover effects of the Brazilian industrial policy are not yet known.

The spending cuts promoted by the Argentine president have affected state research and development agencies, funding for productive sectors, and the training of new researchers by the National Council for Scientific and Technical Research (CONICET, Consejo Nacional de Investigaciones Científicas y Técnicas) (Schteingart et al., 2024). The only instrument created by Milei that could come close to an industrial policy is the so-called Incentive Regime for Large Investments (RIGI, Régimen de Incentivos a las Grandes Inversiones), which provides tax and customs incentives for industry (Schteingart et al., 2024). These incentives, however, have little effect due to the current recession in Argentina’s domestic market. Milei’s lack of an industrial policy comes in the wake of an industrial policy with few results carried out during the Fernández government (2019–2023), which suffered the consequences of the COVID-19 pandemic and the lack of foreign currency, with the former affecting the domestic market and investments, and the latter affecting imports of capital goods needed for productive modernization (Schteingart et al., 2024).

In addition to problems related to the lack of competitiveness, industries in both countries suffered from the economic slowdown resulting from neoliberal governments that implemented fiscal austerity plans. These orthodox macroeconomic policies also found support in industries in Brazil and Argentina, which sought integration into European value chains (Bastos, 2017) by lowering the cost of labor.

In Brazil, under the new Lula government, there was a revival of the economy that reduced unemployment to a historic low (6.2% at the end of 2024) and has led to gross domestic product (GDP) growth above the world average (3.2% in 2023 and 3.4% in 2024). The good economic situation led to the rise of private consumption (from 3.1% to 4.8% in 2023–2024) and investments (from −3.4% to 7.3% in 2023–2024), despite the limits on public spending imposed by the approval of the so-called New Fiscal Framework (NAF, Novo Arcabouço Fiscal) in August 2023, that reduced the government spending from 2.6% to 1.9% in 2023–2024.⁷ This revival of the economy, however, is under attack by the financial fraction of the bourgeoisie (Santos, 2024), which advocates increasing interest rates and cutting social spending.

In Milei’s Argentina, the adoption of an ultra-liberal spending-cutting program led to a 1.7% drop in the country’s GDP during his first year of government. Private and public consumption also diminished by −4.2% and −3.2%, respectively, leading to a drop in investment (−17.1%). These cuts repress the aggregate demand of the Argentine economy and the circulation of goods within Mercosur, imposing difficulties on the resumption of regional integration. The lack of investments might also deepen the decadence of the Argentine industry in Mercosur. The decomposition of the GDP for both countries is presented in Table 2.

With regard to the Mercosur–EU Agreement, the Lula government demanded a renegotiation, between 2023 and 2024, of the terms agreed in the so-called “Brasília Package” (Brasil, 2024a), with the inclusion of safeguards more favorable to the automotive sector than those negotiated in the text of 2019. The conclusion of the Agreement was a demand of the Brazilian industry and agribusiness (Berringer & Botão, 2024; Botão, 2023b). The 2019 text provided a linear 15-year deadline for tariff elimination between the bloc, while the 2024 text stipulates the tariff elimination of 30 years for vehicles with new technologies, 18 years for electric vehicles and 25 years for hydrogen-powered vehicles. The 2024 Agreement also establishes a new safeguard mechanism toward the automotive sector, as follows:

In the event of an increase in European imports that cause damage to the industry, Brazil can suspend the schedule for de-regulating the entire sector or resume the rate applicable to other origins (currently 35 per cent) for a period of three years, renewable for a further two years, without the need to offer compensation to the European Union. The assessment will take into account parameters such as the level of employment, sales and production volumes, installed capacity and the degree of occupation of the automotive sector’s capacity. (Brasil, 2024a, point 5, translation added)

Table 2.

Economic Indicators in Brazil and Argentina, 2023–2024.

	Brazil		Argentina
	2023	2024	2023	2024
GDP	3.2%	3.4%	−1.6%	−1.7%
Unemployment*	7.4%	6.2%	6.2%	6.9%
Private consumption	3.1%	4.8%	1.1%	−4.2%
Public consumption	2.6%	1.9%	1.2%	−3.2%
Investments	−3.4%	7.3%	−1.9%	−17.1%
Exports	9.1%	2.9%	−6.7%	19.4%
Imports	−1.2%	14.7%	2.2%	−17.4%

Source: Own elaboration, based on IBGE (Instituto Brasileiro de Geografia e Estatística) and INDEC (Instituto Nacional de Estadística y Censos de la República Argentina) data.

Note: *According to the last quarter of the year.

Furthermore, safeguards were agreed that provide for the preservation of the use of government purchasing power to promote industrial policies by Mercosur countries. Despite the resistance of some European countries, such as France, Italy, Poland and Ireland, Trump’s trade war could accelerate discussions in Europe about the bi-regional agreement, signaling that more protectionist countries like France could take a stand in favor of ratifying the deal (RFI, 2025). Despite the more advantageous terms for Mercosur countries, Milei defends the need to revoke Decision 32/00 and negotiate a free-trade agreement with the United States, though the agreement with the Europeans is demanded by the Argentinian agribusiness and part of the industry (Sanz Cerbino & Grimaldi, 2020).

The estrangement between Milei’s Argentina and Lula’s Brazil weakens the initiatives around regional productive integration. Mercosur’s institutional strengthening took place during periods when there was dialogue between governments around common objectives (Botão, 2022; Ferraz, 2021). The lack of dialogue led to periods of freezing of the regional bloc, as shown in Table 3.

In this sense, it is important for regional productive integration that there is not only dialogue, but also a convergence of objectives aimed at reducing external dependence and developing regional productive forces.

Table 3.

Convergence Periods Between Brazil and Argentina in Mercosur.

Period	Composition of the Governments	Characteristics of the Integration
1989–2001	Neoliberal governments of Collor, Franco, and Cardoso in Brazil, with Menem and De La Rúa governments in Argentina led by the financial capital	Open regionalism integration and the use of Mercosur’s bargaining power regarding the negotiations of FTAA
2001–2015	Progressive governments of the Workers Party and Kirchnerists supported by sectors of industry, agribusiness, and the popular classes	Multidimensional integration with inclusion of social discussion in Mercosur. Deepening of the productive integration
2015–2019	Conservative governments of Temer and Bolsonaro in Brazil and Macri in Argentina led by the financial capital and part of the agribusiness	Convergence toward a “commercial” Mercosur and the conclusion of the Mercosur-EU Agreement
2019–2023	Bolsonaro government in Brazil and the Peronist Alberto Fernández in Argentina	Lack of convergence within Mercosur and Brazilian attempts to open the regional bloc
2023 onwards	Third Lula government in Brazil and the Fernández and Milei governments in Argentina	Brief period of convergence when a Local Currency Payment System was discussed, with the subsequent lack of convergence when Milei became president

Source: Own elaboration.

Conclusion

In this article, we have sought to present the theoretical basis for Latin American productive integration that would materialize in initiatives such as Mercosur. The regional bloc already emerged under neoliberalism and the new international division of labor, but managed, during a period of convergence between progressive governments, to achieve limited productive integration in strategic sectors. This integration, however, suffered discontinuities due to the interests of the industrial bourgeoisie of Brazil and Argentina in integrating into the value chains of central countries, with the Mercosur–EU Agreement as its greatest instrument of association. The definitive conclusion of the agreement in December 2024 obtained more advantageous terms than those negotiated in 2019, reducing the risks foreseen in previous years, although it still reflects the industry’s continued interest in joining European value chains. In addition to the agreement, the imposition of limits on economic recovery and the lack of convergence between the countries due to Milei’s ultra-liberal policies could represent another period of stagnation in productive integration in the bloc.

Footnotes

Acknowledgements

This article is the result of research carried out within the scope of the CAPES/DAAD Sustainable Development agenda for the Greater ABC region and German investments in value chains.

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The authors received no financial support for the research, authorship, and/or publication of this article.

Notes

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