Both teams agreed to pay a fine for not playing the qualifier, which was stopped shortly after kickoff last September when Brazilian health officials entered the field saying four Argentina players had broken COVID-19 protocols.
FIFA had wanted the match to be played next month, even though it had been rendered essentially meaningless after both Brazil and Argentina qualified for the World Cup in Qatar despite playing a game less than other South American countries.
FIFA initially fined the soccer bodies of both countries and demanded the match be played. Brazil's confederation and Argentina's federation took the case to the Court for Arbitration of Sport, where all three parties agreed to the deal to cancel the game.
Brazil coach Tite and his Argentina counterpart Lionel Scaloni had argued that the risks of injuries and suspensions were too high for the game to be played ahead of the tournament in Qatar.
The decision leaves both teams free to schedule September friendlies against different opponents instead.
In Qatar, Brazil is in Group G with Serbia, Switzerland and Cameroon. Argentina is in Group C with Mexico, Poland and Saudi Arabia.
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