With Lula da Silva in Brazil, can we talk about a single currency in South America again?
Single Mercosur currency? Unique South American currency? Single currency of Latin America? Single currency between Argentina and Brazil? These and other ideas have circulated time and again in recent years, and the rumor regained strength with the return of Luiz Inácio Lula da Silva to the Presidency of Brazil.
It should be noted that once upon a time it was the president of the main power in the region who spoke, in the framework of a party meeting, about creating a monetary unit for the entire region.
However, the Brazilian Economy Minister, Fernando Haddad, clarified in the last week that nothing is being studied on the table.
For the moment, everything seems to indicate that the possibility of this monetary feat is nothing more than an expression of desire of the Argentine government, and not a real and complete intention of Brazil, which is basically the country that has enough power to lead such a process.
Reviewing the latest events, the Argentine ambassador in Brazil, Daniel Scioli, had assured on Tuesday, January 3: “Although in the long term the objective is to aim towards a single currency, in the immediate future it will seek to strengthen the payment system in local currencies with Brazil”.
However, Haddad stated hours later: “There is no single currency, there is no such proposal, you will be the first to know (referring to journalists).”
One of the signs that had excited the Argentine government is the appointment as Brazil’s deputy economy minister of former banker Gabriel Galípolo, a promoter of the single currency.
WHAT WOULD A SINGLE CURRENCY LOOK LIKE?
In May of last year, Lula da Silva spoke of the possibility of creating a regional currency to “not depend on the dollar anymore” and versions of a project to create a monetary unit called SUR, including South American countries, emerged.
Currently, the country most concerned with the possibility of exchange rate unification is Argentina, which would settle for a system of bilateral payments that boosts bilateral trade.
“The single currency issue is more a proposal from Argentina than from Brazil. It is the Argentines who are driving this issue,” Marcelo Elizondo, director of the DNI consultancy and international trade expert, told Bloomberg Línea.
And he pointed out that, although the scope of the single currency is not clear, “what is being sought immediately is something like a payment instrument for bilateral operations between Argentina and Brazil.”
In this regard, Elizondo explained: “The idea seems to be that trade between Argentina and Brazil does not depend on the dollar, but that it can be paid with local currencies and that these local currencies are exchanged at the border for a kind of binational currency that has a nomenclator and then the central banks do the clearing. And that this facilitates bilateral trade”.
On the other hand, Elizondo considered that it would be almost impossible to think of a currency that would replace the existing ones, like the euro in the European Union. “That would require having a single central bank, countries giving up their monetary policies, countries committing to pre-monetary policies. All of this requires some very complex technicalities.”
DOUBTS ABOUT THE POSSIBILITY OF A SINGLE CURRENCY
Last November, Benjamin Ramsey, leader of JPMorgan’s Latin America economic research team, told Bloomberg Línea: “It sounds to some Latin American leaders to have a single currency in the region, but that would not be so viable.”
Ramsey had justified his vision with the following statements:
- “In our view, the coordination required amid the vast institutional differences between countries and sensitive considerations around sovereignty greatly undermines any prospect of a regional currency.”
- “We would be surprised if this idea became a formal proposal, even outside of the design phase.”
For his part, Roy Barreras, president of the Senate of the Republic of Colombia at the end of October, had pointed out: “Latin America, to achieve a single currency, first has to make an integration treaty and create a binding Latin American parliament as the European Parliament”.
With information from Bloomberg
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