Economist Robin Brooks is optimistic about Brazil’s economy and suggests Argentina would benefit more by tying its currency to Brazil’s Real.
He once worked for the International Monetary Fund (IMF). Now he is the Chief Economist at The Institute of International Finance (IIF).
He shares his views on Twitter to 266,000 followers. Recently, he started talking about Argentina’s financial woes.
Javier Milei, Argentina’s unconventional leading Presidential candidate, wants to fight 100% yearly inflation with U.S. dollars.
Brooks calls this a “bad plan.” He says Argentina should aim for tight spending to curb soaring prices.
Brooks suggests Argentina peg its currency to Brazil’s real. He argues that both nations are big in the commodity trade.
Brazil’s Central Bank also has better credibility, Brooks adds. He thinks this move could work well for Argentina.
Emilio Ocampo, a local professor, opposes Brooks. He is an advisor to Milei. Ocampo says Argentinians won’t swap their dollars for the Brazilian currency.
Some experts say using the dollar has downsides for Argentina. The country would depend on U.S. interest rates. Brooks disagrees.
He thinks Argentina and Brazil share similar economic trends. Both countries trade a lot and export goods like soy and meat.
Brooks’ thoughts sparked online chatter. People are debating what currency Argentina should use.
Background
Pegging to the Brazilian Real could offer Argentina stability, especially if Brazil’s economy continues to thrive.
Linking currencies could promote closer trade relations between Brazil and Argentina, benefiting both nations.
However, Argentina would relinquish some control over its monetary policy, which could be risky in a downturn.
If Brazil faces an economic crisis, Argentina would suffer, directly tied to the Real.
Brazil’s Central Bank might be hesitant to accept the arrangement, fearing potential risks could spill over into its own economy.
Therefore, careful consideration and risk assessment are essential before considering a significant change.