Common currency, the bet of Brazil and Argentina not to depend on the dollar

Brazil and Argentina have raised the possibility of developing a trade exchange mechanism based on a “common currency” that would reduce dependence on the dollar.

“We have decided to move forward with discussions on a common South American currency that can be used for both financial and commercial flows, reducing operating costs and reducing our external vulnerability,” Alberto Fernández’s government said.

He added that it aims to remove barriers to trade, simplify and modernize the rules and encourage the use of local currency.

Faced with this, Finance Minister José Antonio Ocampo said that he welcomes the initiative to create this currency, which is why he proposes that it be managed by the Latin American Reserve Fund.

“If a Latin American country trades with another Latin American country, payments can be made in the national currency, after which accounts are opened with the central banks, which are in charge of the brokerage. It could be replaced by a currency that we all share, not a common currency, but a currency that is supported by all, but that would not be a country’s currency, but a complementary payment system. It seems like a good proposal to me,” said Ocampo.

Experts think

Faced with this approach, former Senator of the Republic Juan Camilo Restrepo argued that this is unlikely due to the high inflation that South American countries have.

“In Brazil inflation is 6% and in Argentina 100% and now they are going to take out the common currency. We have to be careful not to get caught up in that distracting dance,” he said.

Restrepo recalled that it took the European Union years to prepare for the introduction of the euro in 1999, and this was possible thanks to the coordination of monetary policies between countries.

In turn, Juan David Ballén, director of analysis and strategy at Casa de Bolsa SCB, said that the differences in the management of monetary and fiscal policy in the countries of our region are so great that they make it difficult to achieve success in the creation of a regional currency.

“Perhaps it is much better to be able to do transactions in local currency between the countries of the region, as it would preserve better purchasing power,” Ballén stressed to EL HERALDO.

In turn, Fernando Salazar, a research professor at the Almirante Padilla Naval Cadet School, said these are statements that are the product of the exacerbation of the moment and depend largely on the scenario in which the leaders find themselves.

“It would not be a positive idea and would have serious consequences for the region’s economies, which fail to respond to earlier stages of trade exchange, production capacity strengthening and cooperation,” he said.

He added that “it is necessary to find the common factor in these economies, and not to believe in populist ideas without basis or without serious analysis, presented with arguments as weak as dependence on the dollar.”

“These processes are not that fast and it would take about two years to see the circulation of this currency parallel to the current one in each country, an element that adds even more uncertainty. It is necessary and urgent to find viable solutions to get out of the crisis resulting from the pandemic that has been added to the bad governments in our region,” he said.

Source: El heraldo