The presidents of Brazil and Argentina are considering creating a common Latin American currency.
Presidents Lula Ignacio de Silva of Brazil and Alberto Fernandez of Argentina announced talks at this week’s Community of Latin American and Caribbean States (CELAC) conference in Buenos Aires, launching a perpetual proposal to end the dominance of the US dollar. in the region to revive.
In an article published in Perfil, an Argentine newspaper, Presidents Lula and Fernandez wrote that their countries are exploring options to create a common currency, the sur (south in Spanish), intended to facilitate financial and commercial transactions between the countries. encourage. Argentina’s economy minister Sergio Massa added that Brazil and Argentina would invite other countries in Latin America to join, but urged patience, citing the difficulty of trade integration.
The move illustrates how Lula is keeping his campaign promises to promote greater economic interdependence in the region. Elected at a time when most Latin American countries have leftist heads of state – including the region’s five largest economies, Lula and other leaders have close ties, opening the possibility of a new era of cooperation for the rapidly developing countries to economic influence of the United States.
The day after the announcement, Brazil’s Finance Minister Fernando Haddad downplayed the idea of completely overhauling the real economy, saying that the countries were exploring all options to increase trade. Meanwhile, Argentina is experiencing its worst inflation in three decades, while Brazil’s economic growth is expected to slow as Lula implements plans to boost government spending.
Rising inflation in Argentina:
The gaucho: Latin America has flirted with a common currency before
In 1987, the leaders of Brazil and Argentina announced the creation of a “currency unit to facilitate regional payments” called the gaucho. Sounds familiar?
The idea of a common currency has long had a following in the region, with populist leaders pointing to the dominance of the dollar as evidence of neo-colonialism. Three countries in Latin America (Ecuador, El Salvador and Panama) use the dollar as their primary domestic currency, ensuring excessive US influence in their economies.
However, forming a common currency is not an easy task. The first negotiations on the single currency of the European Union lasted more than ten years. And when the euro was introduced in 1999, it was considered an invisible currency for the first three years and was used only for accounting purposes and electronic payments. It wasn’t until 2009 that the Treaty of Lisbon created the Eurogroup, the currency’s official governing body.
Demand for an alternative to the US dollar is on the rise globally, with Russia and China promoting their currencies for international payments, particularly after recent US sanctions against Russia raised the possibility that the dollar could become a tool of political effort.
In addition, the relative strength of the dollar in 2022 caused consumer prices and debt levels to rise in some regions, with Myanmar’s new government saying the dollar was being used to “bully bully smaller countries”.
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