Brazil And Argentina Promote To Create The World’s Second-Largest Currency Bloc

Key Points:

• Brazilian President Luiz Inacio Lula da Silva and Argentine President Alberto Fernandez stated that Brazil and Argentina wanted to integrate their economies more, even by creating a unified currency.
• The concept of a single currency was first broached in an article written last year by Fernando Haddad and Gabriel Galipolo, who are currently the finance minister and executive secretary of Brazil, respectively. Lula made reference to the proposal when running for office.

In a joint piece they wrote, Brazilian President Luiz Inacio Lula da Silva and Argentine President Alberto Fernandez stated that Brazil and Argentina wanted to integrate their economies more, even by creating a unified currency.

At a conference this week in Buenos Aires, the two largest economies in South America will examine the proposal and encourage other Latin American countries to participate.

According to officials speaking to the Financial Times, the initial focus would be on how a new currency, which Brazil considers dubbing the “SUR” (south), may increase regional commerce and lessen dependency on the US dollar. It would initially function in tandem with the Argentine peso and the Brazilian real.

“We intend to break down the barriers to our exchanges, simplify and modernize the rules, and encourage the use of local currencies. We also decided to advance discussions on a common South American currency that can be used for both financial and trade flows, reducing operating costs and our external vulnerability,” says the text published on the Argentine website Perfil.

The concept of a single currency was first broached in an article written last year by Fernando Haddad and Gabriel Galipolo, who are currently the finance minister and executive secretary of Brazil, respectively. Lula made reference to the proposal when running for office.

Following the custom of initially visiting Brazil’s biggest trading partner in the area, Lula picked Argentina for his first overseas trip after assuming office. After four years of difficult ties, the previous right-wing president of Brazil, Jair Bolsonaro, left office.

The veteran leftist’s first overseas journey since taking office on January 1 will begin on Sunday night with a trip to Argentina, where a formal statement is anticipated.

In recent years, Brazil and Argentina have considered creating a single currency, but conversations stalled due to Brazil’s central bank’s resistance, according to a source familiar with the matter. There is more political support now that leftist leaders run both two nations.

A representative for the Brazilian finance ministry stated that he was unaware of any working groups on a unified currency. He mentioned that Fernando Haddad, the finance minister, had co-authored a piece last year, prior to taking his present position, that suggested a South American digital common currency.

Brian Armstrong, co-founder and CEO of Coinbase exchange, humorously commented on the news on Twitter, wondering if Bitcoin was a contender.

Brazil and Argentina are also affected by severe inflation. Crypto and digital assets are the choices of investors at the moment when their currencies are continuously depreciating against the US dollar, culminating in mid-2022.

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