By Arkady Petrov
RIO DE JANEIRO, BRAZIL – President Jair Bolsonaro and Economy Minister Paulo Guedes have told Argentinian and Brazilian entrepreneurs, meeting in Buenos Aires, that Brazil and Argentina intend to move forward with a proposal to establish a common currency that would be called “Peso Real”.
According to information from business sources heard by O Globo, as both countries are politically aligned, the trend is to align macroeconomic policies to the common currency, a proposal that has been widely discussed in previous governments.
“Two elements concern us, a short-term one and a long-term one. The first concerns the fact that any devaluation of the Real could put pressure on the Argentinian foreign exchange market, which is very fragile,” said Diego Coatz, executive director of the Industrial Union of Argentina (UIA), who attended the business meeting.
For the UIA, the poor performance of the Brazilian economy and the delay in the approval of the pension reform could result in a sharp devaluation of the Brazilian currency.
The economist pointed out that the Central Bank’s reserves could back a likely decline in the value of the Real against the Dollar, and this would help Brazil’s export sector.
However, any sudden moves in the Real could have a very negative impact on Argentina’s economy, acting on local prices.
“This is one of the issues that concern us the most because Argentina needs exchange rate stability,” said Coatz.
Regarding the long term, the economist said that the UIA would like to see the regional relationship evolving to resume the agenda of productive integration and macroeconomic coordination.
This alignment should lead to a common currency to ensure investment predictability, in his view.
“It is vital for us to have stronger coordination of monetary, exchange, and fiscal policy,” he said, adding that there is fear among businessmen about changes in Brazil that could affect the Argentinian economy. “Any change in sensitive areas has to be well coordinated, taken with caution, and through negotiation,” he said, fearful of unilateral measures.
According to federal deputy Eduardo Bolsonaro (PSL-SP), accompanying his father during the official visit, the proposal of “Peso Real” is a conjecture and should not be implemented in the short term.
The subject will be discussed in greater depth among entrepreneurs from both countries during a meeting scheduled for next month between the UIA and its Brazilian counterpart, the National Confederation of Industry (CNI), under the Brazil-Argentina Business Council (CEMBRAR). Argentina is Brazil’s third largest trading partner, after the United States and China.
Brazil Central Bank Denies
According to Reuters, Brazil’s Central Bank has denied any planning is underway to create a monetary union with Argentina.
“The central bank of Brazil does not have any plans or studies in progress for a monetary union with Argentina,” it said in a statement late on Thursday night, as reported by Reuters.