Fernando Haddad: "No country is obligated to be in Mercosur, but together we have better negotiating conditions."
Fernando Haddad is a key figure in Luiz Inácio Lula da Silva's administration. As Minister of Economy, he led internal initiatives such as the push for tax reform in the country's largest economy , which experienced monetary and fiscal turbulence at the end of 2024, and emphasized the need to "keep the books in order." "The difference between a modern left and a modern right is not disregarding public finances, but rather who will bear the brunt of the adjustment," the official, who served as Brazil's Minister of Education between 2005 and 2012 and as mayor of São Paulo between 2013 and 2017, tells LA NACION.
Following the summit in Buenos Aires, Brazil assumed pro tempore leadership of Mercosur, with an agenda that includes the agreement with the European Union and tensions over the pursuit of integration and the intention to move forward with bilateral agreements outside the bloc. " No country is tied to Mercosur, and nothing forces us to be. What Brazil advocates is that we can negotiate as a bloc, because that strengthens us ," emphasizes Haddad, who acknowledges dialogue with the Argentine economic team to advance regulatory issues and the use of local currencies in bilateral trade.
The boom in Argentines on Brazilian beaches last summer illustrated the new economic landscape, with an appreciating peso benefiting the Brazilian economy and raising concerns for Argentina. The numbers also reflect this: in the first five months of the year, the bilateral deficit increased by 28% and now stands at US$2.247 billion, challenging the Central Bank (BCRA). “We can't make the current situation our medium- and long-term plan, because many things are going to happen. The exchange rate and interest rates are going to change. We have to look a little further ahead and see what's important for the region right now,” says Haddad, acknowledging dialogue with the Argentine government regarding energy imports and streamlining processes in the automotive sector.
What is your vision for the present and future of the bloc?
I think Mercosur has been somewhat stagnant for many years. It hasn't prospered as much as it could have. On the contrary, it's even suffered some setbacks. But I think opportunities are opening up that we should take advantage of . Mercosur needs to escape global bipolarity, with greater integration with Europe and other regions . We need to eventually include other South American countries that might be interested. Bolivia is, of course, a candidate . We have to think about the future of the region, and I understand that Mexico's case is a learning experience. It tied its destiny to the United States and is now receiving severe sanctions with Trump's "tarifazo." That's an example of how important it is not to be an appendage of any large bloc. We must diversify our relations as much as possible to benefit from the enormous natural resources we have , our huge domestic market, the quality of the South American workforce, and the fact that we are, from a geopolitical standpoint, in a highly privileged position.
How do the intentions to move forward with bilateral agreements coexist? Can they coexist with Mercosur?
I think there's room for that, as long as the centrality of Mercosur's pillars isn't compromised. But I think we'd be better able to negotiate together than in isolation. It doesn't make much sense, given the strength of a market of nearly 300 million people , that one, with only a fraction of that, has more negotiating power. For example, with the European Union, an agreement is only possible because we're united.
-And is there a willingness on the part of the governments of that union?
Each country will have time to express its views, but I felt a great deal of agreement among the finance ministers. We discussed customs policy, procedural standardization policy, quality issues for products manufactured here, health issues, and even monetary integration for specific sectors, which could have local currencies and not need to resort to the dollar or the euro for day-to-day operations. The president of the Central Bank of Argentina was at the bilateral meeting, and he mentioned concrete possibilities for achieving monetary integration by seeking to use local currencies. I didn't see any prejudice or ideological barrier that would prevent us from prospering together.
-However, how to connect with the world and the region seems to be a major ideological and political difference between the governments of Argentina and Brazil.
-Look, How each country organizes itself internally is a local matter. The Brazilian people organize the Brazilian state one way, the Argentine people organize theirs another way. This has to do with democracy. Today we are in power, tomorrow the election will determine who will be in power. We can't act as if we were eternal. Our countries are eternal, and we want them to prosper. Therefore, there are state policies that are independent of local ideological issues, of how you are managing the local economy, of what your social policies are. Everyone is choosing their own path democratically. The Argentine people will demonstrate in a few years, the Brazilian people too, and that's democracy. We cannot be intolerant of one another, given the historical moment each country is experiencing.
The Argentine government always talks about its desire to open up the economy, and sometimes seems to oppose Mercosur's ideas. Can this scenario coexist with the bloc's future?
- No country is bound to Mercosur, any country can leave Mercosur. There is nothing that forces us to be What Brazil advocates is that we can negotiate as a bloc, because that strengthens us. And Brazil understands that reciprocity must be a principle of negotiations, between blocs and between countries. In other words, unilaterally reducing barriers without demanding that the world, which is increasingly protectionist, open its markets to products produced here doesn't seem sensible to me, at this point in life . In my opinion, this could cause great harm to the region. If a country with the power of the United States is adopting protectionist practices —and we're talking about a country with the largest economy in the world, with one of the highest per capita incomes in the world— is protecting itself in a certain way, adopting late-stage mercantilism, there has to be sensitivity. You have to be pragmatic and make the right decisions.
What is the future of the agreement with the European Union?
I think we've finally reached a point where it's viable. Even because Europe also has few alternatives. What's the EU's alternative? Where is it going? It's caught between two gigantic economic blocs, and it has to find a way to become more competitive. And Mercosur can be a way out for it, if it's smart. If it only wants to buy primary goods, it won't work.
-What are those opportunities or advantages?
The EU needs to think about production chains that decentralize certain links to increase the competitiveness of its products. The EU won't be able to produce competitively using only European labor. There's no way. So we organize production differently than the traditional international division of labor. If not, it won't work for them or for us.
-How would regional currencies be used in Mercosur?
I think we can give legal tender to our currencies. The president of the Central Bank of Argentina even talked about doing it sectorally , and that would be very easy to do. The automotive sector, for example, could already start doing so. Many payments in Argentina are made using PIX [the instant digital payment system]. And if we don't do it, the market will, because integration is happening. You can open an account in Brazil at any time, from here, log in on your cell phone, create an account, and pay for things here in Buenos Aires with reais if you want, because many people accept it. The market is already doing it, also with cryptocurrencies; it's happening. We can organize this in a way that's more beneficial for both countries. That's why we spoke with the president of the Central Bank of Argentina and Minister Caputo himself. The automotive sector is interested in making things more cost-effective, because it's cheaper when you can use local currency; you don't pay fees, banks, or intermediaries; there are no exchange losses. Many costs are reduced. Obviously, you have to be extremely cautious, because you're dealing with something very sensitive. But I think the digital economy will foster a major transformation in monetary matters.
-Regarding the bilateral relationship, how do you define that dynamic? Today, the exchange rate looks beneficial for Brazil.
- The flow of people and goods between our two countries has greatly improved. Both trade and tourism grew this year, and in my opinion, they will continue to grow. We have much room to prosper together.
-But I imagine that for a country like Brazil, having a trading partner with this exchange rate is an advantage.
-This could translate into opportunities for Argentina , because we have no difficulty exploring partnership possibilities involving other inputs that Brazil needs.
-Where?
-Vaca Muerta was discussed , and there are some obstacles that can be overcome in relation to that. We have a very long-standing partnership with Bolivia, which we want to maintain, but we would need more Argentine input . There's no reason why we shouldn't explore the possibility of prospering together, without a major imbalance between us. And another point is that Things won't stay as they are. Economic variables will change over time: the exchange rate, interest rates... Many things will change. And we can't make the current situation the medium- and long-term plan, because many things are going to happen. So, we have to look a little further ahead and see what's important for the region right now.
-In an interview, you mentioned that "politics must support economic development." The Argentine government proposes that the state should distance itself from the economy and not influence the dynamics of the private sector. What is your view on this idea?
-We have very different realities. Brazil and Argentina are experiencing very different domestic times. We're adopting a different fiscal adjustment model than here. We're taking care of the public accounts, but taxing the rich more. We're doing it differently. Everyone finds their own path. I'm not here to interfere in Argentina's internal affairs. We have a path that was forged by President Lula that is different from the one forged here. But that doesn't prevent Brazil and Argentina from seeking a rapprochement based on what they share. And as I say, democracy will set the domestic course for how the state should be organized. Voters are the ones who shape, to a certain extent, how things should be organized.
-You insisted on safeguarding public finances, something that many governments here neglected. What's the importance of that?
-The thing is The difference between a modern left and a modern right is not disregarding public accounts, because the right does not always take care of the fiscal situation. In Brazil, several right-wing leaders have destroyed public accounts. What's modern? It's knowing who will bear the brunt of the adjustment. In Brazil, we identified that workers were the ones who paid the lion's share of the bill and the support of the state, and that there were many wealthy people who weren't contributing their fair share. So we said, we're going to make the fiscal adjustment, but we're going to charge those who aren't paying. For example, online gambling went four years under the Bolsonaro administration without paying any taxes, almost as if it were a Holy House of Mercy. And Lula's government said: 'You have to help achieve fiscal balance, start paying.'
-It's a strong message for left-wing governments.
-Of course, I think so. My opinion is this: it's very important for a state, in an emergency situation, to be able to spend. A great advantage of the state is that it can borrow, but it can do so in specific situations . When you have a major recession, a pandemic, a war. There are several situations in which this state sovereignty is very important because it gives the country the security that, if necessary, it will intervene. Are we experiencing that situation now? No. So we have to use this time of economic growth we're experiencing to put things in order . It's not that I'm against deficits and debt as a matter of principle, because there are times when you have to act. But we're not experiencing that moment. This is the time to put things in order, to grow more and prosper more. I've been in office for two and a half years saying this. Now, How can we put the accounts in order? By asking for contributions from those who weren't contributing. That's the difference between the left and the right.
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