Discussion of a single currency in Latin America. Last Minute WORLD, CURRENT headlines and events


Brazil and Argentina are in talks to create a common currency, which is expected to be called “Sur”, which means “south”. The most important difference between the project and the euro in the European Union is that the participating countries will keep their own currencies. Introduction of the sur as a new currency, parallel to the Argentine peso and the Brazilian real; and then the participation of other Latin American countries is planned.

Brazilian and Argentine authorities have said that if a common currency is adopted, cooperation and trade in the region will increase; argues that transaction costs will decrease and dependence on the US dollar will decrease.

The exchange between Brazil and Argentina, whose bilateral trade reached $30 billion last year, is carried out in dollars. Brazil is Argentina’s largest economic partner and Argentina is Brazil’s third largest trading partner.

Noting that it includes topics such as financial regulation of the introduction of a single currency, defining the roles of central banks and coordinating intergovernmental economic policies, experts agree that it is difficult to implement the project in the short term.

Argentinean expert in international economics and politics, Nicolás Pose, notes that the implementation of the project is not possible in the short term, given the three conditions “international labor mobility, openness and flexibility in the region, and similar economic cycles”, which are the three conditions put forward by the theory of optimal monetary zones.

Pose draws attention to the differences between the Argentine economy, which recorded inflation at 94.8% last year and experienced exchange rate volatility, and the Brazilian economy, which closed last year with 5.79% inflation and was relatively stable in exchange rates. courses.

How Argentina, which ran a $3.365 billion trade deficit with Brazil last year and owes $70 billion to the IMF, can close that gap with a single currency, or how the dollar has risen 67 percent against the real in the past 10 years , while up 3662 percent against the Argentine peso, is considered one of the main challenges facing the project.

“The need for dollars may decrease”

An article published by the Commonwealth of Latin American and Caribbean States (Celag) says that the regional giant Brazil, together with Argentina, one of the most important countries in South America, is implementing a common currency project, and the possibility of a new financial architecture in the region is greater than ever before.

According to Argentine economists Guillermo Oglietti and Mariana Dondo, the Sur project could be a milestone for monetary sovereignty, regional stability and prosperity, and the dollar can only be used to cover the trade deficit, not in all trade.

In the article “For example, in 2021, tourism exports from Argentina to Brazil amounted to $74.3 million and imports $84.1 million, and in total, this trade between the two countries required $158.4 million. In the case of the implementation of the single currency project, the calculations will be made in sour, and instead of 158.4 million dollars, the need for only 9.8 million dollars, equal to the difference between imports and exports, will reduce dependence on dollars.

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