The presidents of Brazil and Argentina, Luiz Ignacio Lula Da Silva and Alberto Fernández have expressed the desire and “need” for jointly develop and circulate a commonly used currency, like the Euro, to promote foreign trade and transactions between the two countries.
According to statements by the Brazilian president at a press conference for his visit to the Argentine Republic in the framework of the meeting of the Community of Latin American and Caribbean States (Celac), the currency of use that they seek to put into circulation would be known as ‘South’, and according to him it would be positive for the countries since they have difficulties in acquiring dollars.
“We are working so that each economic ministry with its team can make a foreign trade and transaction proposal between the two countries that is carried out through a common currency, based on numerous debates and many meetings”Lula commented.
At the same time, It should also be noted that it would have its sights set on expanding this union to the rest of the Latin American countries “in the long term” and preventing the region’s trade policy from depending on the dollar.
For his part, Alberto Fernandez, Argentine President He highlighted the proposal despite not knowing how it could turn out, and noted that he understood, like Brazil, the danger that a country’s trade would depend on a foreign currency.
“It is an interesting reflection. It is necessary to deepen the links between Argentina and Brazil because it means motorizing all relations in Latin America”Fernandez said.
Precedents for a single Latin American currency
That being said, it should also be noted that It would not be the first Latin American single currency initiative, since in the city of Cochabamba-Bolivia in 2009, the countries that made up the Bolivarian Alliance for the Peoples of Our America (ALBA) signed an agreement for the creation of a single virtual currency for Member countries: the Sucre (Unique Regional Compensation System) with the main goal of displacing the dollar as the main currency in the region’s market, something that today we see that it did not achieve, but what happened?
According to the Ecuadorian journalist Xavier Basantes, from the newspaper El Comerciothe best year of this payment system was 2012, due to the boom in commodities by executing 2,646 foreign trade transactions for 1,070 million dollars. In the case of Ecuador, he reports that there were operations for 910 million dollars and the majority of transfers were made with Venezuela.
However, the journalist affirms that the decline began from the following year: “As of 2013, operations with the sucre are practically in free fall; along with the collapse of oil prices, which was the main financial support that these countries had. This, despite the fact that its promoters came to compare it with the monetary unit that the European Community achieved with the euro”.
“For this reason, when Venezuela began to enter into a crisis a few years ago, the use of the mechanism was also affected. Today (the sucre) is almost unused”Daniel Legarda, president of the Ecuadorian Federation of Exporters (Fedexpor) told Basantes in 2020.
The Euro as a model
For its part, the ‘Financial Times’ portal pointed out that the consolidation of the South project and expansion to other countries would mean creating the second largest monetary union in the world, only behind the European Union, a statement that Elon Musk thought was a good idea. as he expressed on his twitter account.
Probably a good idea
— Elon Musk (@elonmusk) January 22, 2023
Finally, it is also worth noting that Brazil is currently Argentina’s main trading partner. Bilateral trade between the two countries in 2022 reached 26.419 million dollars (24.017 million euros).
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