Sometimes history repeats itself, it happens in a cyclical way and, of course, with other protagonists, but always under circumstances similar to those observed in other periods.
Last Monday, two large Latin American economies, Brazil and Argentina, announced their intention to move towards a common currency that they will call “South”. After more than 24 hours of the announcement, the reactions inside and outside the region have been negative, the most critical pointing out a series of obstacles that are very difficult to overcome for the monetary union, at a certain moment, of these two nations.
From the size of the economies, with Brazil as a giant and Argentina increasingly dwindling; up to the difference in growth in recent decades and the currency conditions of each country: Brazilian real and Argentine peso. The chances of success of a common currency are very slim.
But, it is not only the differences between Brazil and Argentina; it is a fact that at this moment The economic, political and exchange rate conditions do not exist to think of a monetary union in Latin Americain the style of the one that was successfully achieved in Europe.
In factthe region is experiencing a turbulent period, one more in its historyboth economically and politically, and all of this is reflected in the exchange rate.
From Usumacinta to Patagonia, Latin American convulsion
Starting from the southern border of Mexico, with Guatemala, Latin America is increasingly in turmoil, here are some small recounts:
Central America and the Caribbean are not experiencing the intense civil war that they experienced in the eighties of the last century, but the conditions of their population are not the best. Economic development is almost a lost hope, the region has not been able to banish extreme poverty from a large part of its population and, as if that were not enough, political instability is rampant in almost all the countries in the area. The difference is that before the tyrants had boots and a military uniform, today they wear a jacket and tie.
Guatemala is struggling to consolidate its fledgling democracy, affected by years of coups d’état and military governments; Honduras is in the same conditions, besides being a country with few opportunities; Nicaragua is now under a dictatorship from those who fought for years against dictators in that countryonly to end up in the same thing.
El Salvador lives an apparent calm and political stability, but at any moment it can break down. Thus, all countries have traits of instability or, outright, are too small to signify a revolutionary change,
In the Caribbean, things are not very different. This region is made up of countries with little development and high levels of poverty, while Cuba continues to accumulate years as an orphan from the former Soviet Unionwithout much of a future and with the potential for political instability.
Already in South America, we are perhaps in the part of the region that registers the greatest economic-political instability, something that has not been observed for several years.
Right now Peru is experiencing one of the most complex moments in its history and the situation threatens to boil over, pushing the country into a civil war in which, if it happens, nobody will gain anything.
bolivianFor its part, it tries to stabilize its political situation, but there are outbreaks of violence; in ColombiaPresident Gustavo Petro has joined the long list of leaders who realize that it is one thing to be in the campaign and propose easy solutions, and quite another to be in charge of a country and make decisions.
Chile is another example, with a “progressive” president who cannot find a way to meet the high expectations that he generated in the campaign that led him to the presidency of that country.
Maybe Paraguay and Uruguay along with Ecuador and the Guyanasregister the greatest economic strength in the region, but it is not to celebrate, because risks always exist.
Talk about Venezuela It is something else, it is definitely the biggest failure of populism and “progressive” economic policies, which led to the ruin of that nation, along with the military, of course.
They deserve a special mention Brazil and Argentinanot only because they are the nations that are supposed to reach a monetary union at a certain moment, but also because they are part of this landscape of convulsion that dominates Latin America from the southern border of Mexico to Patagonia.
You don’t have to go too far to know what we’re talking about; just at the beginning of this month and year, a mob of protesters assaulted the buildings that are the headquarters of the federal government of that country, in support of the former president Jair Bolsonaro. The coup attack did not work, but it revived old ghosts in a nation scarred by military dictatorships from other times.
What yes, is that the political risk is latent in Brazil, the country is clearly divided and in these conditions the economy faces serious challenges.
Argentina, for its part, also has high levels of political instability. In the same way, it is a nation tormented by the memories of the military coup. The above, not to mention economic instability, runaway inflation that last year reached almost 100 percentplus the high external indebtedness that it renegotiates from time to time, only to end up the same as many years ago.
Black outlook for the “South”
The supposed common currency that one day Brazil and Argentina will have will be called “South”. at least that is the initial proposal; but his panorama is complex even without being born. Long-term political, economic and monetary stability are essential requirements to create a common currency.
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