Dollar, Exports, and Mercosur: How Flávio Bolsonaro's Victory Could Impact Argentina

The electoral upset of Flávio Bolsonaro in the elections held in Brazil this Sunday was well received by the market, which quickly reacted with a strong appreciation of the Real and a rise in Brazilian stocks. Generally speaking, a victory for the opposition candidate would be favorable for the government of Javier Milei, according to expert consensus. However, there are some doubts about the economic direction Bolsonaro might take and its implications for Argentina.

This Monday, Argentine stocks and sovereign bonds benefited from the tailwind coming from the neighboring country. "An eventual triumph of Flávio Bolsonaro in the runoff would be good news for the Argentine capital markets," highlighted the Head of the Investment Office at Cohen Aliados Financieros, Sergio González, in response to Ámbito.

"The compression of the region's risk premium tends to attract flows towards Latin American assets. This favors Argentine sovereign bonds in dollars, local stocks with exposure to Brazil, and Brazilian Cedears such as NU, Itau, Petrobras, and AMBEV," he elaborated.

For his part, the international markets analyst at Portfolio Personal Inversores (PPI), Martín Cordeviola, explained to this medium that regarding stocks, bonds, and Argentina's country risk, the effect would be limited. "A better climate in Brazil can attract flows to the region and improve the general tone of Latin American assets, but in the case of Argentina, local factors weigh much more.

A Stronger Real Would Benefit Argentina

The appreciation of the Real — which correlates with a cheaper dollar in Brazilian lands — is the most relevant aspect for Milei's government in light of a possible Bolsonaro victory. This is because Brazil is Argentina's main trading partner. According to INDEC, between January and August 2026, bilateral trade between the two countries reached $19.208 billion, with exports amounting to $8.578 billion and imports equivalent to $10.630 billion.

The economist from Eco Go, Honorio Zabaleta, explained to Ámbito that "a very significant part of industrial origin exports goes there." Approximately 64% of exports to Brazil this year corresponded to Manufactures of Industrial Origin (MOI), meaning about $5.490 billion, most of which corresponds to vehicles.

"Initially, an appreciation of the Real generates a greater advantage for us, in the sense that our exports would become cheaper for them. This would lead to an improvement in the trade balance," he commented. "This also implies that vacations in Brazil will become more expensive," he added.

For his part, Cordeviola emphasized that if Bolsonaro's victory "comes with a credible fiscal adjustment, it should compress Brazil's risk premium and support the real," which "improves Argentina's competitiveness" against the neighboring country. "This is not a minor detail: the real accounts for 28% of Argentina's multilateral real exchange rate," he stressed.

From Max Capital, they explained that "fiscal deterioration is the biggest problem of the Brazilian economy, and Bolsonaro proposes a new fiscal rule, under an economic team that would share members with his father's administration."

According to their projections, if the Liberal Party candidate is crowned the winner of the elections on October 25, the Real would appreciate by around 5%, while the rates of the Central Bank of Brazil should decrease by between 20bp and 30bp, from 13.75% annually.

González stated that "a stronger Real, along with a Brazilian economy with fiscal anchors and declining rates, would improve the demand for Argentine exports, especially in the automotive chain and regional economies".

Brazil: Stronger Real and doubts about Bolsonaro's economic plan.

Political Alignment

Cordeviola mentioned that another aspect to analyze would be the greater political alignment between Milei, Flávio, and the Trump administration, "which could facilitate the bilateral agenda, although its impact will depend on concrete policies".

Similarly, from Max Capital, they stated that the presence of a "natural ally" for President Milei's administration "is good news, which should accelerate Mercosur's global integration".

González reached a similar diagnosis and suggested that the political affinity between both governments "could unlock Mercosur's trade agenda, including the agreement with the European Union".

Zabaleta commented that, from this, "several things can arise, whether trade agreements (perhaps supplying Brazil with gas from Vaca Muerta), or working together to strengthen the region's exposure to Washington and the rest of the world".

Doubts about the Economic Plan

Despite the fact that the outlook is --- generally speaking --- beneficial for Argentina, Zabaleta commented on the uncertainty regarding the candidate's fiscal program. "Why does this matter? Because a large adjustment plan can initially generate a negative impact on Brazilian demand. In this sense, lower Brazilian income can depress the demand for Argentine products," he commented to this medium.

Similarly, an analysis by Thomas Haugaard, portfolio manager at Janus Henderson, stated that Brazil's fiscal credibility will remain the main variable in the medium term for the market: "A disciplined fiscal framework could reduce sovereign risk premiums, improve debt dynamics, and favor capital flows".

He added that "the market will ultimately demand policy execution and not just signals from the electoral outcome".

Zabaleta added a second risk factor: the trade policy that Jair Bolsonaro's son will have. "If he carries out a process of greater trade openness, expanding the number of markets with which Brazil can trade, Argentina will face greater competition".

This takes on particular importance in the context of the Free Trade Agreement between Mercosur and the European Union, a variant that could increase European competition with Argentine products. "Not only in the automotive sector but also in agribusiness and pharmaceuticals", highlighted the economist from Eco Go.

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