Wires

Argentina-Brazil relations tense up with Peronist election victory

Anthony Boadle

BRASILIA, Oct 28 (Reuters) - The election of Peronist Alberto Fernandez in Argentina, whom Brazil's right-wing President Jair Bolsonaro has called a "red bandit," sets the stage for a run-in between South America's two biggest economies that could derail their Mercosur trade bloc.

Bolsonaro told reporters in Abu Dhabi on Monday that Argentine voters had made a mistake and he had no intention of congratulating Fernandez for his win on Sunday.

The immediate hostility highlighted sharp ideological lines reappearing in Latin American elections. Center-left Fernandez's victory, along with last year's win by leftist Andres Manuel Lopez Obrador in Mexico, mark an end to market-friendly reforms in both countries, leaving conservatives in Chile, Colombia and Brazil more isolated.

Brazil-Argentina relations have been cordial and constructive since both shed military rule in the 1980s, despite traditional tensions in geopolitics and on the soccer field.

Although they compete in global grains and beef markets, Mercosur, which includes Uruguay and Paraguay, has fostered a healthy exchange of cars and other manufactured goods, making Brazil the top trade partner of Argentina.

As both economies sputter, however, their presidents may find it tempting to play to their bases, antagonizing ideological foes and playing up their differences over red-button issues such as Cuba and Venezuela.

As he cruised to victory, Argentina's president-elect posted a Twitter message calling for the release of Brazil's former leftist president Luiz Inacio Lula da Silva, who was jailed last year for a bribery conviction.

The tweet riled Bolsonaro. "The first thing Fernandez did was to post 'Free Lula' saying he was unfairly jailed. So we can see where he is coming from," Bolsonaro said.

Fernandez, a trade protectionist, has vowed to pull out of Mercosur.

Bolsonaro said on Monday that his government will wait to see what position Fernandez takes once he assumes the presidency in December.

"Let's see how he behaves," Bolsonaro said, adding: "I hope Argentina does not change its course on trade."

Foreign policy and trade experts say the two economies are too interdependent to entirely break up Mercosur.

The greater threat may be to a trade deal between Mercosur and the European Union, which has taken two decades to negotiate and is facing resistance in European countries.

"The relationship between Argentina and Brazil will, at best, be cold for the next three years," said Welber Barral, a Brasilia-based consultant and former trade secretary.

He said, however, that industrial groups on both sides will try to "appease" the governments in an effort to insulate their exports and the EU-Mercosur agreement. (Reporting by Anthony Boadle; Editing by Brad Haynes and Grant McCool)