Monday, January 30, 2023

Brazil and Argentina will announce preparations to create a common currency

The governments of Brazil and Argentina will announce next week preparations to launch a common currency project that could turn the two countries, the two largest South American economies, into the world’s second largest currency bloc.

The initial intention is that this new currency – whose name, Brazil proposes, is “the South” – will boost regional trade and reduce the impact of the dollar. In principle, both countries contemplate a period of simultaneous trade with the Brazilian real and the Argentine peso.

“We will announce the 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”, announced the Minister of Economy of Argentina, Sergio Massa, to the Financial Times.

“I do not want to create false expectations: it is the first step on a long road that Latin America must travel,” added the minister, who assured that Argentina and Brazil will invite other countries in the region to join this project, before recalling that it took Europe 35 years to create the euro.

The official announcement is expected to be made during the visit to Argentina that Brazilian President Luiz Inácio Lula da Silva begins this Sunday night, on his first trip abroad since he took power again on January 1.

Brazil and Argentina have been discussing a common currency for years, but the talks have never come to fruition due to opposition from the Central Bank of Brazil. Under the government of the left in both countries, experts understand, in relation to Lula and the Argentine president, Alberto Fernández, there is greater political support for the project.

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