Argentina, the Next Domino?

Bullseye

The doomsday clock for U.S.-Argentine relations has been surprisingly sleepy since last year’s election. President Trump kept uncharacteristically mum during Argentina’s presidential campaign, even as the Peronist Alberto Fernández pummeled Mauricio Macri, a pro-business incumbent and Trump ally. Following Mr. Fernández’s victory, the State Department issued a perfunctory statement expressing optimism about the future of the “long-standing and mutually respectful partnership,” and Mr. Trump placed a congratulatory call to Mr. Fernández, who tweeted afterward Argentina’s “intención de mantener una relación madura y cordial con los Estados Unidos.”

Stress Tests


The diplomatic relationship – rebuilt by Mr. Macri and President Barack Obama following 12 years of tension during the Kirchner governments – has already been tested several times. Even before Mr. Fernández’s inauguration, he sparked fears in Washington by clashing with Brazilian President Jair Bolsonaro, Mr. Trump’s favorite Latin American head of state, and championing the former Bolivian leader Evo Morales, a White House bête noire who lives in exile in Buenos Aires.

 

For its part, the Trump administration, despite its guardedly optimistic tone toward the new Argentine government, has also taken confrontational actions.

 

In December, Mr. Trump unexpectedly threatened to levy tariffs on Argentina’s steel and aluminum exports, after backing down from a similar warning in 2018. (He has again withdrawn the proposed measures.) There was another dustup at Mr. Fernández’s inauguration, when Mr. Trump’s top Latin America adviser, Mauricio Claver-Carone, traveled to Buenos Aires but boycotted the ceremony due to the presence of a senior Venezuelan official, Jorge Rodríguez. (Other members of the U.S. delegation – including Secretary of Health and Human Services Alex Azar and Michael Kozak, the State Department’s senior Latin America official – did not join the protest.)

 

The White House stirred up the latest conflict in January, when it announced Brazil had leapfrogged Argentina on the U.S. list of candidates for the Organization for Economic Cooperation and Development.

 
OECD Cold Shoulder

 

So far, the Fernández administration has sought to limit the fallout from its early disagreements with the United States. Indeed, it brushed aside the OECD snub gracefully. Though Argentina has a competitive relationship with neighboring Brazil, OECD membership was apparently not a priority for Mr. Fernández.

 

In any event, Argentina was always an imperfect candidate. On the one hand, OECD membership offered an opportunity to enshrine Mr. Macri’s easily reversible economic opening. But the country’s seesawing economic policies were also problematic for the OECD – a small club that requires consensus for decision making. Moreover, Argentina’s accession process would have been long and uncertain, even had Mr. Macri won reelection. Argentina would have been only the fourth Latin American OECD member – following Mexico, Chile and Colombia – and membership would have required a raft of politically difficult reforms.

 
‘America First,’ Argentina Second

 

Importantly, Mr. Trump’s treatment of Mr. Fernández is not so different than his approach to Mr. Macri.

 

True, Mr. Macri was only the second Latin American leader to visit Mr. Trump in the Oval Office, and senior administration officials frequently extolled Mr. Macri’s pro-market platform.

 

During his 2017 Buenos Aires visit, Vice President Mike Pence said Mr. Macri had brought a “bold reform agenda to Argentina, an agenda that is transforming Argentina’s economy at home and restoring its reputation around the world.”

 

But U.S. policy toward Argentina was a mixed bag. Argentina notched a few wins, including its 2017 reinstatement in the Generalized System of Preferences, ending a five-year suspension from a program that provides duty-free access to the U.S. market for designated goods; and the approval by the Overseas Private Investment Corporation of hundreds of millions of dollars in financing for Argentine projects, including wind farms and investments in unconventional oil and gas.

 

But even under Mr. Macri, Argentina was not immune from “America First” friendly fire. For example, though Mr. Macri’s negotiators successfully pleaded for relief from U.S. steel and aluminum tariffs, they failed to persuade the White House to reverse crushing duties on Argentine biodiesel – a critical export worth $1.5 billion annually before Mr. Trump pulled the plug.

 
Rapprochement to Détente

 

Nevertheless, the change in government in Argentina has clearly left the U.S.-Argentine relationship on weaker footing – and left observers, including international investors, on pins and needles. For that reason, Argentine foreign policy shifts on Venezuela and U.S. policy shifts on the OECD are closely watched for potential diplomatic consequences.

 

For now, however, bilateral ties remain intact. As Argentina prepares to send a seasoned diplomat, Jorge Argüello, as its ambassador to Washington, and seeks U.S. support for its high-stakes debt renegotiation with the International Monetary Fund, both sides say they prefer cooperation to confrontation.