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Brazil and Argentina will discuss for common currency.

South Amer­ica’s two biggest eco­nom­ies will dis­cuss the plan at a sum­mit in Buenos Aires this week

South America

and will invite other Latin Amer­ican nations to join. The ini­tial focus will be on how a new cur­rency, which Brazil sug­gests call­ing the «sur», could boost regional trade and reduce reli­ance on the US dol­lar, offi­cials told the Fin­an­cial Times. « a decision to start study­ing the para­met­ers needed for a com­mon cur­rency, which includes everything from fiscal issues to the size of the eco­nomy and the role of cent­ral banks,» Argen­tina’s eco­nomy min­is­ter Ser­gio Massa told the Fin­an­cial Times. « it’s the first step on a long road which Latin Amer­ica must travel».

Ini­tially a bilat­eral project, the ini­ti­at­ive would be offered to other nations in Latin Amer­ica. A cur­rency union that covered all of Latin Amer­ica would rep­res­ent about 5 per cent of global GDP, the FT estim­ates. The world’s largest cur­rency association, the euro, encom­passes back 14 per cent of global GDP when meas­ured in dol­lar terms. Other cur­rency blocs include the CFA franc, which is used by some African coun­tries and pegged to the euro, and the East Carib­bean dol­lar.

Trade is flour­ish­ing between Brazil and Argen­tina, reach­ing $26.4bn in the first 11 months of last year, up nearly 21 per cent in the same period in 2021. The attrac­tions of a new com­mon cur­rency are most obvi­ous for Argen­tina, where annual infla­tion is approach­ing 100 per cent as the cent­ral bank prints money to fund spend­ing. Argen­tina has been largely cut off from inter­na­tional debt mar­kets since its 2020 default and still owes more than $40bn to the IMF from a 2018 bail­out. 

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Comments

  1. Alberto23 January 2023 at 11:59

    It's a good idea, in theory. Let's see how they plan to implement it and how it is actually put in place.

    ReplyDelete
    Replies
    1. Daniel23 January 2023 at 13:01

      I don't think it's the best idea. They need to assess the good and the bad about such a move. Otherwise this could be a similar case to that of Brexit, in a way.

      Delete
  2. Linda23 January 2023 at 13:27

    Little known fact: Gaddafi tried to implement something like this in Africa. Not many people know this. He didn't succeed but if he did I wonder if France would have been happy.

    ReplyDelete

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