In Brief
In early August 2026, Brazil downgraded relations with Argentina to chargé d’affaires level, while Washington simultaneously revoked the visa of the Brazilian ambassador. Two diplomatic ruptures in one week, with the same political core: Brazil’s October elections.
US trade pressure is not an isolated economic dispute. The accumulation of tariffs to 37.5 per cent follows an explicit linkage between punitive measures and the legal proceedings against the Bolsonaro family.
The timing is awkward for Europe. All four Mercosur countries have now ratified the trade agreement with the EU, while the European Parliament has put its own approval on hold pending the Court of Justice of the European Union.
Latin America Regional Update | In the first week of August 2026, Brazil lost its two most important diplomatic anchors within a matter of days. On 4 August, Washington revoked the visa of the Brazilian ambassador to the United States. A day later, Brasília announced that it was downgrading relations with Argentina to chargé d’affaires level. The ambassador in Buenos Aires, who had already been recalled at the end of July, will not return to his post. For the first time in decades, neither of South America’s two largest economies therefore has an ambassador accredited to the other.
That is remarkable, because formally both ruptures concern words. The immediate cause of the break with Argentina was Javier Milei’s appearance on 25 July at the convention where Flávio Bolsonaro, Jair Bolsonaro’s son, was nominated as a presidential candidate. Milei repeatedly called Lula a thief and a convicted criminal, both there and in the days that followed. Brasília summoned the Argentine ambassador and handed him a protest note. According to Poder360, Minister Vieira justified the downgrade on the grounds of “repeated acts, insults and aggression against Brazil, the institutions of the Brazilian government, the executive branch, the head of state, and also the judiciary”. Trade and consular services remain in place. What disappears is political dialogue at the highest level.
Is Brazil being pushed into regional isolation by pressure from the US and Argentina?
The run-up
To understand the current situation, we need to go back to how quickly the region’s political landscape has shifted. Less than two years ago, Brazil, Colombia, Mexico, Chile and Bolivia together formed a left-wing majority in Latin America. Little remains of the pink tide, or what some call the second pink tide. Bolivia elected a president at the end of 2025 who brought nearly two decades of socialist government to an end. In December, Chile voted by a substantial majority for the (far) right. In Peru, Keiko Fujimori, daughter of the authoritarian and deeply corrupt Alberto Fujimori, took office. And on 7 August 2026, Abelardo de la Espriella was sworn in in Colombia, completing the line-up of new Trump supporters.
Lula and his Uruguayan counterpart are now the last significant left-wing heads of government in South America. Mexico is holding its ground, but is under pressure from the US of its own. What began as a wave of left-wing electoral victories has, within a single electoral cycle, turned into a series of governments that are explicitly orienting themselves towards Washington. Whether that movement is really best understood as a pendulum is another matter: Giulia Semeghini argues in Beyond the Left-Right Pendulum that the metaphor conceals more than it explains.
That reorientation took shape at the beginning of this year. On 7 March, Trump received twelve Latin American heads of state and government at his own resort near Miami for the so-called Shield of the Americas summit. Brazil, Mexico and Colombia (then still under Petro) were not invited. Officially, the summit focused on drug cartels, migration and foreign interference, with particular criticism directed at China’s presence in the region. In practice, a dividing line was drawn between those who belong and those who do not.
The calendar matters
Against this background, the events of this week take on their significance. Brazil’s elections will take place on 4 October, with a possible second round on 25 October. Lula, now eighty, is seeking a fourth term. Opposing him is Senator Flávio Bolsonaro. In June, Datafolha still put Lula at 41 per cent against 31 per cent in the first round, and at 47 against 43 in a second round. An AtlasIntel poll in early July put the figures at 48.8 against 42.3. At the beginning of August, Bloomberg reported that the lead had narrowed further. The outcome is therefore still wide open.
It is precisely during this period that Washington is piling on trade measures. In July 2025, Trump threatened a 50 per cent tariff, at the time explicitly linked to the prosecution of Jair Bolsonaro. In February 2026, the US Supreme Court removed the legal basis for that decision. The response was to pursue other avenues. Since 22 July 2026, a 25 per cent tariff has applied to most Brazilian imports, with exceptions including coffee, beef, orange juice and certain aerospace components. On top of this, the US Trade Representative imposed another 12.5 per cent through an investigation into forced labour, bringing the cumulative tariff to 37.5 per cent. This also makes the measure more difficult to challenge, because each component has to be contested separately. It affects an export flow worth approximately 40 billion dollars a year. The Peterson Institute had already concluded that the forced-labour case against Brazil is not actually about forced labour.
A series of smaller confrontations is also under way. Washington placed Brazil’s two largest criminal organisations on the list of foreign terrorist organisations, a move opposed by Lula because it opens the legal door to US action on Brazilian territory. Brazil, in turn, denied visas to two US officials who said they had come to discuss electoral integrity. In 2025, Washington had already sanctioned judges of Brazil’s Supreme Court, arguing that the action against Bolsonaro made free and fair elections in 2026 impossible.
How direct is the American hand?
It is clear that Washington favours the right-wing candidate. But the results in Bolivia, Chile, Peru and Colombia can largely be explained by inflation, feelings of insecurity, exhaustion with incumbent governments and disappointing policy outcomes. Polls show that trust in democracy and institutions is at a very low level in many countries. Giulia Semeghini sets out in the second part of her analysis how far voting behaviour in the region is better explained by those domestic factors than by an ideological swing. The rise of populism in the region, albeit for different reasons in each country, therefore cannot, and certainly not everywhere, be seen as the result of direct or indirect US interference.
There is, however, a recognisable pattern. Pedro Telles, affiliated with the Brazilian think tank Democracy Hub, mapped out for the Washington Brazil Office the means used by the US government and its allies around elections elsewhere. These include public expressions of support for friendly candidates, financial support tied to an electoral outcome, sanctions against opponents, and implicit threats of military action. The Argentine precedent is the most concrete example: in 2025, US support for the peso was explicitly linked to Milei’s performance in the mid-term elections.
The question, then, is what happens when US preferences, regional allies and the Brazilian opposition begin to reinforce one another, and the costs of a Lula victory are made visible in advance. Earlier this year, the Atlantic Council observed that the tariffs were more likely to help Lula domestically than hurt him in terms of popularity, because they allow him to portray himself as a defender of Brazilian sovereignty. US opinion research from this year shows that the standing of the United States has fallen sharply in several Latin American countries. What is clear is that polarisation is only increasing, and that these Brazilian elections could become a dramatic spectacle worthy of a telenovela.
Brazil’s response: sidestep or strike back?
The Brazilian government’s response is best described as sidestepping. Brazil is not seeking direct confrontation with the US, as virtually no country can afford to do, but is systematically reducing the weight of the American market in its own economy. The legal route formally runs through the World Trade Organization and through the new reciprocity law, which establishes the conditions under which Brazil may suspend trade concessions towards countries that act unilaterally. The economic route runs through diversification. Brazil completed its ratification of the agreement with the EU in February, and Lula enacted it by decree at the end of April. He agreed with Xi Jinping to accelerate negotiations between Mercosur and China, with agreements on critical raw materials, fertilisers, satellites and technology. Cooperation with India was established on rare earth metals. BRICS serves less as an anti-Western bloc than as a back door. It is a way of retaining policy space and access to financing when Western channels become inaccessible. This is middle-power politics, a concept developed by our analyst Michel Michaloliákos (see also: The HIG): increasing the number of partners in order either to reduce the costs of each individual rupture or to reduce dependencies. What makes this more difficult for all middle powers is time. Diversification works over a period of years, while the tariffs are having an impact now and the elections are two months away.
But Brazil’s response is not unambiguous. Trump imposed a 37.5 per cent tariff, sanctioned Supreme Court judges and revoked the visa of the Brazilian ambassador. The response remained legal and economic. Milei used words, and the response was an institutional rupture. The balance between damage and response has therefore been reversed. Partly, this is simply realism, because a middle power can punish a neighbouring country but not a superpower. Partly, it is defensible. Milei campaigned on Brazilian territory for the opposing candidate, and a tough response allows Lula to portray the opposition as being supported from abroad. In doing so, Brazil is doing on a smaller scale what it accuses the US of doing: using the diplomatic instrument with a domestic election in mind. This is a problem because it divides Mercosur at the moment when Brazil needs the bloc most, and undermines precisely the argument Lula uses to seek support in Europe.
That is the heart of the problem. A middle power derives part of its weight from its own size, but also from its regional position of power and support. Brazil has retained its size and lost its backing. Mercosur, for years the instrument through which Brazil established its regional role, now functions as a bloc whose two largest members do not exchange ambassadors. The counterargument deserves immediate attention, however, because Mercosur had already been a difficult bloc long before this summer, with a protracted dispute over the common external tariff and members regularly going their own way. And precisely this bloc achieved something at the beginning of this year that had not been achieved in twenty-six years of negotiations: all member states ratified the agreement. The Milei government simply took part in that process.
Mercosur can still ratify, but it will find it harder to represent itself because of the political divisions. And that matters now that the provisional application of the interim part, as well as the European Parliament’s approval currently before the Court, are at stake. Uruguay openly warned that rising tensions are not helping the bloc, precisely at a time when its trade relationship with Europe needs to take shape. That is an uncomfortable lesson about the multipolar order. More centres of power offer a middle power greater leverage if it comes to the table with a region behind it. Brazil can still turn to China, India and the EU, but no longer as the clear leader of a bloc. The doors are open; what Brazil brings through them simply carries less weight.
Policy options for the Netherlands and the EU
1. Accelerate approval of the agreement with Mercosur while it still can. The agreement consists of two parts. The interim trade agreement falls under exclusive EU competence and has been provisionally applied since 1 May 2026, after the Council approved it despite objections from France, Poland, Ireland, Austria and Hungary and an abstention by Belgium. The broader partnership agreement is mixed in nature and must be ratified by all twenty-seven member states. On the South American side, that work is complete: Brazil, Argentina, Uruguay and Paraguay finalised ratification in the first few months of 2026. On the European side, the process has instead been put on hold. On 21 January 2026, the European Parliament asked the Court of Justice for an opinion on compatibility with the Treaties, suspending its own approval procedure for sixteen to eighteen months. Final entry into force is therefore pushed back well into 2027. Provisional application can be terminated, and the Brazilian government that has politically backed this agreement may no longer be in office two months from now. For the Dutch government, which voted in favour, and for the narrow parliamentary majority supporting the agreement, this means a concrete task: use the remaining months to prepare parliamentary consideration rather than waiting for the Court, and press the Council to ensure that the Commission visibly gets implementation of the interim part under way. Those who want the agreement must understand that delay carries a political risk.
2. Defend the rule of law with the instruments already available, not with statements. Sanctions against Supreme Court judges because of their rulings, and tariffs openly linked to an ongoing criminal case, establish a precedent that is not confined to Brazil. Europe has more at its disposal than expressions of concern. First, the EU can actively support Brazil’s case at the World Trade Organization and use the appeal mechanism that Europe itself established to circumvent the paralysis of the Appellate Body. Brazil and the Netherlands are both party to it, so a binding ruling is legally achievable. This does not defend Lula, but the trading system. Second, the Council can state in its own name that sanctioning judges because of their judicial decisions is incompatible with the rule of law, as happened previously when US sanctions were imposed on judges of the International Criminal Court. After all, a norm that applies only when European interests are affected is not a norm.
3. Prepare for both outcomes on 25 October. If Flávio Bolsonaro wins, Brazil will move more quickly towards Washington and European priorities concerning deforestation, climate and human rights will come under pressure. If Lula wins, there is a real possibility that the US government will challenge or simply ignore the result. In that case, the European position on the legitimacy of the Brazilian election result itself becomes a geopolitical choice. It is better to think through that position now than in the week that follows.
(This article is an automatic translation from: Een middenmacht zonder buren?)
Very interesting observations for a part of the world we don't pay enough attention to. Thanks