Brazil and Argentina intend to create a common currency, according to the Financial Times, citing officials. According to the report, the plan will be discussed and officially announced at a summit this week in Buenos Aires.
“There will be… a decision to begin studying the parameters required for a common currency, which include everything from fiscal issues to the size of the economy and the role of central banks,” Argentina’s Economy Minister Sergio Massa told Reuters.
Other Latin American countries, according to Massa, will be invited to participate in the common currency project. Brazil is proposing to call the new currency’sur,’ which translates as’south’.
Massa noted that the creation of the’sur’ is likely to take years, citing Europe’s 35-year creation of the euro.
“It would be a study of trade integration mechanisms. I don’t want to set any unrealistic expectations… It is the first step on a long journey that Latin America must take.”
According to other officials who spoke with the news outlet, the new currency is expected to boost regional trade and reduce the countries’ reliance on the US dollar.
Brazil and Argentina have been discussing the idea of a common currency for several years, but according to sources, Brazil’s central bank previously blocked efforts to get such an initiative off the ground.
The economies of the two countries are the largest in South America. Brazil is a member of the BRICS group and has enjoyed relative economic stability in recent years, but analysts predict a number of headwinds this year that could dampen growth. Meanwhile, Argentina has been plagued by economic insecurity for decades. The country has repeatedly defaulted on its debt, most recently in 2020, and has had to rely on capital controls to protect its currency. The country’s inflation is currently skyrocketing, and it owes the IMF approximately $40 billion.
