A new common currency between Brazil and Argentina, which was announced in recent days under the name of SUR, gained prominence in the Brazilian and international press. Many imagined the birth of a new euro, although the situation is different.
When contacted, the Central Bank of Brazil declined to comment on the matter for the report. Central bank president Roberto Campos Neto even commented on plans for an international currency at an event for university students in the United States in recent days.
To better understand the concept of a common currency, the live coins experts on the subject.
Common currency between Brazil and Argentina requires great care and great legal and economic engineering, lawyer says
For the lawyer specialized in economic and banking law, partner at Jantalia Advogados, Fabiano Jantalia, it is first of all necessary to understand that from the point of view of international economic law, the creation of a common currency “the last step in the process of economic integration of countries: monetary union”.
“The implementation of this requires a lot of care and a lot of legal and economic engineering, because in South America there is little convergence between legal rules and the economic, fiscal and monetary policies of the countries.”
Jantalia notes that it is additionally necessary to better understand the details or components of this idea. Is the goal really to have one currency? Would Brazil stop having the real and start having another currency? Who would issue this coin?
“Depending on these reactions, the legal form would be completely different and could require a constitutional amendment, approval of a treaty or international agreement, as for example within Mercosur, or even at least the adoption of a law. . In any case, I do not see any possibility of a common currency without the necessary approval of the National Congress.”
Professor of International Relations reminds that countries should not abandon their own currency
According to the professor of International Relations at ESPM and economist Leonardo Trevisan, the plan to create a single currency is historic and dates back to the creation of the Euro, when the debate became even more heated in Latin America and especially with the countries of Mercosur .
The original goal is not to stop countries from using their own currencies, the Real and the Argentine Peso, but to mutual coin for commercial transactions between them, without depending on the dollar.
“In practice, the adoption of the euro depended on countries with more robust economies with a GDP of more than $1.6 trillion, an unfavorable situation in our region.”
The specialist indicates that the discussion about the creation of the single currency has resurfaced because of the transaction costs for export with the dollar. For example, the professor indicates that the novelty can yield benefits for countries.
“Both Brazil and Argentina have no dollarized economies and many differences in foreign exchange reserves, Argentina has about $7 billion and Brazil $350 billion. From the point of view of operational transactions, the implementation of a currency in Mercosur is good and can bring economic benefits such as increased exports, employment, market expansion, enabling competitiveness for both economies.”
Fernando Haddad confirmed in Buenos Aires that there are no plans for a common currency and that the Real should not be abandoned
According to Agência Brasil, Fernando Haddad arrived in Buenos Aires with Lula, the new government’s first international visit.
Asked about the new currency, the finance minister stated that there are no plans for a common currency, like his predecessor Paulo Guedes, but a common currency.
“We have received an order from our presidents not to adopt an idea of the common currency from the previous government that was not implemented. My predecessor, Paulo Guedes, was a strong supporter of a common currency between Brazil and Argentina. We’re not talking about that. That caused enormous confusion, also in the Brazilian and international press.”
Haddad also recalled that the project does not provide for the exit of the Real, but rather tools to improve trade between the countries.
It is not yet clear when the new common currency will arrive, but the world market is following the initiative that could bring Brazil and Argentina closer together.
Source: Live Coins
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
