Analysts do not expect the common currency of the South to play a role in the short term

As one of the agreements to revive the strategic alliance between the two countries, “we aim to overcome barriers to our exchanges, simplify and modernize the rules, and encourage the use of local currencies.”

The plan, which will be discussed during the visit of Lula, who arrived in Argentina this Sunday and will meet his counterpart on Monday to sign a series of agreements on various issues, includes the possibility of expanding the common currency to other countries . official sources

Read more: Argentina, the epicenter of political news in Latin America

“It will be decided to start examining the parameters needed for a single currency, which will include everything from tax issues to the size of the economy and the role of central banks,” said Argentina’s economy minister Sergio Massa, Sunday against the financial newspaper Times.

As the minister added, “it will be a study on trade integration mechanisms”, although he stated that he “does not want to raise false expectations” as “this is the first step of a long road ahead for Latin America”. .

long-term

“None of his statements are short-term measures,” Dante Sica, director of the consulting firm Abeceb and production minister during Mauricio Macri’s term (2015-2019), told EFE.

Sica recalled that progress has been made during this term with regard to a memorandum of understanding between the two countries to explore the possibility of a common currency through a program with the Inter-American Development Bank, and that it was the Central Bank of Brazil who took the initiative. .

According to Sica, “the resilience of the Central Bank of Brazil is strong” because Argentina has an inflation rate of 94.8% in 2022 according to the expectations polled by the Central Bank of Argentina and the private sector will rise to 98.4% in 2023 predicts inflation and “does not have a coherent program to reduce inflation over the long term”.

“The currency as a whole depends on a high level of confidence, established macroeconomic policies and comparable inflation margins,” Sica said, with Brazil’s inflation forecast of 4.8% in 2023.

alternatives

As an intermediary, Sica pointed out that a currency exchange, which both governments have been negotiating since last year, is possible. That way, instead of doing a daily count to see which country raises dollars to liquidate exports, it would be done every six months.

“This financing is not a common currency,” explains Sica, so both countries have to agree on an interest rate.

Marcelo Elizondo, general manager of DNI Consultores, told EFE in a similar vein that Massa’s team talked about a project of a common currency for commercial exchanges between companies from both countries.

Elizondo said: “It is a currency in which peso and real are quoted and used for the payments of the transactions of the companies of the two countries, to avoid being dependent on the dollar.” currency will be as a “nomenclature instrument converted into national currencies”.

Likewise, Elizondo explained that it “requires the coordination of two countries and two central banks,” pointing out that Brazil is autonomous, while Argentina is subordinate to the executive.

In addition, transactions between individuals from the two countries would require a “deft response” from the two central banks to cover what was previously done through the dollar, which would mean “giving way” to a policy of restricting the import and supply of goods. Currencies used by Argentina to pay for foreign purchases due to lack of international reserves.

Brazil is Argentina’s largest trading partner, ending trade relations with its neighbor with a deficit of $2.25 billion by 2022.

Lula da Silva’s return to power after former Brazilian President Jair Bolsonaro (2019-2022) had a bad relationship with the Fernández administration has raised expectations for a deepening of bilateral relations between Argentina and Brazil, but economists highlight the strength of the Brazilian institutions.