The visit of Luiz Inácio Lula da Silva to the President of Argentina, Alberto Fernández, caused a lot of talk. The two countries are discussing the creation of a common South American currency focused on commercial and financial transactions.
The measure was formalized last Monday (23) by President Lula and the action is part of a strategy aimed at strengthening regional integration with the countries of South America. The possibility generated many doubts and to clarify some points, we have gathered here the most common ones.
What we will see in this article:
1. How would the common currency work?
The two presidents signed an article published last Sunday (22) in the Argentine newspaper Profile, declaring that they will advance in the studies for the creation of a South American currency that is common for commercial and financial transactions. One of the ideas is thinking regarding reducing “operating costs and our external vulnerability”, they wrote.
The formalized document brings the creation of a working group with this great challenge in the coming years. The same project will include studies for launching credit lines from private and public banks so that Argentine importers can buy Brazilian products.
2. Will the Brazilian real end?
Of knocks and that’s it, the answer is no. In line with what has been discussed, the possible common currency would not do away with the real or the Argentine peso. This means that it is very different from the euro, which is the currency in many European Union countries.
The common currency would be formatted to be used in commercial and financial transactions between countries, creating freedom from the dollar. In short, the national currencies would remain the same, Brazil with the real and Argentina with the peso.
3. What’s the point of all this?
Even with its economy in critical condition, Argentina is an important trading partner for our country. However, the commercial exchanges between the countries regressed and for the Lula government, this loss of participation of Brazil was occupied by China.
“[A importação da Argentina] it’s very bad and the problem is exactly the currency, right? This is why we are racking our brains to find a solution”, said the current Minister of Finance, Fernando Haddad, in Buenos Aires.
So, in addition to protecting itself from the dollar, one of the objectives would also be to increase Brazilian exports to Argentina.
4. Is the common currency a new idea?
The creation of a common currency or even a single currency (these are different concepts) has been under discussion for some time. For example, former Economy Minister Paulo Guedes defended the creation of a single currency for all of Latin America.
Another example is that last year, the Minister of Finance, Fernando Haddad, and his executive secretary, Gabriel Galípolo, wrote an article suggesting the use of a common currency in South American trade, something that would help to strengthen the countries .
5. Is the deployment immediate?
Do not. The implementation of the common South American currency would not be something immediate, but a few years from now. The common currency will still be discussed by a working group and perfected. The project intends to start with Brazil and Argentina and then expand to countries in the region.
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