For Lula, Milei Has Gone From Being a Nuisance to Being a Problem
Brazilian President Luiz Inacio Lula da Silva has aspirations for regional and global leadership. Standing in Lula’s way is the fact that he cannot even get a meeting with his counterpart from neighboring Argentina, President Javier Milei.
Seven months after Milei’s inauguration, the two leaders have met only once and even then briefly, on the sidelines of the G7 meeting last month in Italy. Otherwise, they have unartfully dodged each other as they have darted around the region and the world promoting their opposing ideological views.
Lula’s global agenda is expansive. He wants Brazil to have a permanent United Nations Security Council seat. He plans for the country to take a leading role in climate change negotiations as he hosts the U.N. COP30 Climate Change Conference in Brazil next year. He has tried to insert himself as a mediator in the Ukraine conflict. And when BRICS—the political grouping that includes Brazil, Russia, India, China and South Africa—moved to expand last year, Lula made sure to bring along Argentina under then-President Alberto Fernandez as one of its new members.
Milei withdrew Argentina from the BRICS expansion process as soon as he took office in December. That’s consistent with his desire to move the country away from China and closer to the United States. Besides that, he has not clearly outlined an international agenda for his country. But Milei definitely has an international agenda for himself. He has portrayed himself as an ally of Israel and Ukraine, a contrast to Latin America’s left-wing leaders who have opposed the former’s war in Gaza and mainly attempted to remain neutral on the latter’s fight against Russian aggression.
Ideologically, Milei is attempting to turn himself into a global icon for free market libertarianism, speaking at conferences in South America, the U.S. and Europe, and meeting with venture capital investors and social media stars. He uses strong rhetoric in favor of capitalism and against any form of what he views as socialism or Marxism. His relatively extreme views, which only appeal to a small minority of Argentine voters who comprise his base, get him wild cheers overseas.
It does not matter to those who believe in Milei that his spending cuts and watered-down reform package have not yet turned Argentina around from years of economic decline. To the contrary, on paper, the country remains an economic pariah, with high inflation, a broken currency and unsustainable debt. It’s a big difference from Lula, who is often criticized by free market ideologues but whose pragmatic center-left economic policies kept Brazil’s economy quite solid during his previous two terms from 2002 to 2010 and are performing well this time around as well.
Milei has targeted Lula with public insults on several occasions, both during last year’s presidential campaign and since taking office. Tensions between the two leaders once again boiled over this month when Milei skipped a leaders’ summit of Mercosur—the Southern Cone trade bloc—in Paraguay so that he could attend a political rally in Brazil with Lula’s far-right predecessor, former President Jair Bolsonaro. Though Milei’s comments in Brazil were restrained in the sense that he did not directly criticize Lula again, Brazil temporarily withdrew its ambassador from Buenos Aires in protest of his speech.
While Milei’s speech and appearance with Bolsonaro almost certainly annoyed Brazil’s president, from a strategic standpoint, Lula was likely bothered even more by Milei skipping the Mercosur meeting. The organization was created in the 1990s by Brazil, Argentina, Uruguay and Paraguay to promote free trade and a common trade policy among South America’s Southern Cone countries. But ever since its founding, the bloc has struggled to achieve consensus, in part because it has often been politicized at moments of leadership change in each of its member countries.
There is no quick fix to these tensions. Lula and Milei have to deal with each other for at least two more years, and potentially longer depending on whether they are reelected.
The neoliberal free trade agenda of the 1990s was soon challenged by the region’s so-called Pink Tide of leftist leaders—including Lula—in the 2000s. More recently, the organization has stalled as the presidents of its two largest countries, Argentina and Brazil, have clashed more than cooperated. The right-wing Bolsonaro and left-wing Fernandez barely spoke and refused to work together in the three years that they overlapped in office. Now the orientation of the countries’ leaders has flipped, with a left-wing Lula in Brazil and right-wing Milei in Argentina, resulting in the same impasse.
Meanwhile, Mercosur has struggled as an organization. The Economist recently noted that “intra-block exports have fallen as a share of members’ total exports from a peak of 24% in 1998 to around 11% in 2023.” And decades-long negotiations for a Mercosur-European Union trade deal remain stalled just short of a final agreement. As a result, Uruguay has gone its own way and tried to negotiate its own trade deals with countries outside the group, something that goes against Mercosur’s bylaws. Should Milei do the same for Argentina, it could spell the end of Mercosur, leaving Brazil with less influence.
Politically, the Mercosur organization has also lost unity. A fight over Venezuela’s membership, since suspended, dominated much of the 2010s. Bolivia was formally admitted to Mercosur during the meeting last week, but not without some controversy due to the recent coup attempt there. Following the failed putsch, Lula expressed solidarity with Bolivian President Luis Arce, while Milei’s government released a statement claiming it had intelligence that Arce had staged the coup.
Milei’s lack of attendance at the most recent meeting underscored his previous threats to leave the organization. Even if Uruguay and Paraguay don’t defect in such a scenario, Mercosur would have far less influence and economic power without Argentina, depriving Lula of a key multilateral forum that he enjoys using.
There is no quick fix to these tensions. Lula and Milei have to deal with each other for at least two more years, and potentially longer depending on whether they are reelected. Brazil would benefit from a more economically stable and prosperous Argentina providing a key market for exports and serving as a partner for manufacturing supply chains. Argentina needs assistance if its economy is to recover. The Brazilian real and Brasilia’s experiments with a Central Bank Digital Currency could prove quite helpful for Milei as Argentina removes currency restrictions. Mercosur would be an ideal forum for the two countries to work out the details of their economic ties.
But what they should do and what they will do are two different things. Milei wants to avoid Lula, who he views as a socialist, and he won’t participate in Mercosur unless he has greater control of its political agenda. Lula views Brazil as the region’s natural leader due to its economic and political heft, meaning he has no reason to bow to Milei’s demands, especially as Milei flirts with Lula’s political opposition.
And while the two leaders differ significantly in their temperaments and styles, they are both ideologically committed, firmly convinced they are correct and more likely to double down on their dispute than try to make amends in the event their popularity at home begins to fall. This means the tensions between them are likely to persist, and perhaps even worsen, in the years to come.
James Bosworth is the founder of Hxagon, a firm that does political risk analysis and bespoke research in emerging and frontier markets. He has two decades of experience analyzing politics, economics and security in Latin America and the Caribbean.