What Will Happen To Argentina After Brexit? Economy, Falklands Could Be Affected As Britain Leaves EU

While much has been written about the impact of the U.K.’s decision to quit the EU on the country’s political and economic relations with big countries, there may also be significant impacts on Britain’s relationship with smaller nations.

One such country is Argentina, which does a great deal of trade with the EU and has a long-simmering dispute with the U.K. What impact will Brexit have?

• Argentina and the U.K. have been locked in a dispute over the sovereignty of the Falkland Islands, which Argentina refers to as Las Malvinas. Argentina invaded the South Atlantic islands in 1982, prompting the U.K. to declare war and seize them back.

• Campaigners warned in the run-up to Britain’s EU referendum a Brexit could weaken the U.K.’s diplomatic clout, giving Argentina a greater chance to promote its campaign for sovereignty over the Falklands.

• The Falklands rely significantly on the EU single market to sell its exports. Loss of unfettered access to that market, plus the prospect of EU import tariffs, likely will be an economic blow.

• Section 4 of the Treaty of Rome, which established the EU’s predecessor, the European Economic Community, listed the Falkland Islands as a dependent territory of the U.K., offering the islands a degree of certainty support from Britain’s EU partners would be forthcoming. That will now be removed, which some say could embolden Argentina.

• On the economy, the uncertainty caused by Brexit is pushing investors to move their money out of emerging markets like Argentina and into assets seen as safer.

• Argentina runs a current account deficit of more than 2 percent of its gross domestic product, meaning it relies on overseas capital and external financing to underwrite spending. An investor retreat from emerging markets could deprive Buenos Aires of money needed to finance spending and damage the country’s economy.

• There could, however, also be some economic opportunity for Argentina: The country is part of the Mercosur bloc, along with Brazil, Paraguay, Uruguay and Venezuela. Talks on an EU- Mercosur trade deal — which started in 1999 — have stalled, raising the possibility the U.K. could strike a deal with the bloc on its own to purchase beef from Argentina and Brazil.