Brazil and Argentina are beginning preparatory studies for developing a common currency, reported the Financial Times this Saturday (Jan. 21).
According to them, the two countries will discuss the plan in a meeting in Buenos Aires.
According to the newspaper, the initial focus will be how a new currency, which Brazil suggests calling “sur” (south), could boost regional trade and reduce dependence on the U.S. dollar.
At first, it would run parallel with the Brazilian real and the Argentine peso.
“There will be a decision to start studying the parameters needed for a common currency, which includes everything from fiscal issues to the size of the economy and the role of central banks,” Argentina’s Economy Minister Sergio Massa told the Financial Times.
“It would be a study of trade integration mechanisms,” he added.
“I don’t want to create false expectations. . . it is the first step on a long road that Latin America must travel.”
Initially a bilateral project, the initiative would be offered to other Latin American nations. “It’s Argentina and Brazil inviting the rest of the region,” the Argentine minister said.
The Financial Times estimates that a monetary union covering all of Latin America would represent about 5 percent of global GDP.
The world’s largest currency union, the euro, covers about 14 percent of global GDP when measured in dollars.
Other currency blocks include the CFA franc, used by some African countries and pegged to the euro and the Eastern Caribbean dollar.
However, these comprise a much smaller share of global economic output.
The project will probably take many years to realize; Massa noted that it took Europe 35 years to create the euro.
An official announcement is expected during Brazilian President Luiz Inácio Lula da Silva’s visit to Argentina, who travels this Sunday (Jan. 22) on his first international trip since taking office on Jan. 1.