Sunday January 22, 2023 | 8:53 p.m.
The Minister of Economy, Sergio Massa, confirmed this Sunday that the Government is working on a common currency project between Argentina and Brazil that will advance this week within the framework of President Lula da Silva’s visit to the country, and his participation in CELAC.
The official anticipated in an interview with the Financial Times that the two countries will announce the preparatory work for the initiative during the CELAC summit.
What is the common currency project between Argentina and Brazil?
The initial focus will be on how a new currency, which Brazil suggests calling the “sur” (south), could boost regional trade and reduce reliance on the US dollar. At first it would run parallel with the Brazilian real and the Argentine peso.
“There will be a decision to start studying the necessary parameters 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 told the Financial Times.
“It would be a study of trade integration mechanisms,” he added. “I don’t want to create false expectations… it’s the first step on a long road that Latin America must travel,” she insisted.
In principle, a monetary union that would cover all of Latin America would represent 5% of GDP, estimated the Financial Times. Meanwhile, the euro covers 14% of world GDP measured in dollars.
The idea is that the rest of the South American countries can join gradually without having to eliminate their national currencies.
Another issue that was addressed is the possibility, once this initiative is activated, of generating a swap between pesos and reais to offset trade deficits that may exist in the bilateral balance. This would imply that the Government does not spend dollars from the reserves to pay for imports from Brazil.
Meanwhile, from Brazil they clarify that the idea is to establish a common currency for commercial operations. “We are not talking about a single currency, but a common one whose central objective is to be able to compensate trade in a currency that could even be called the South, there is a project out there,” said the diplomat Martínez Pandiani.
