“Sur”: the project for a common currency between Argentina and Brazil

Sergio Massa held meetings with Lula's economic team in Sao Paulo. Progress on the creation of a common currency for bilateral trade. It would not result in the elimination of the peso or the real.

Lula da Silva’s return to power in Brazil will change the region’s political course and strengthen integration. After meeting with the future Ministers of Finance and Industry, Sergio Massa returned from Sao Paulo with the first signs of this trend. Negotiations are moving forward with the main trading partner to create a common currency without eliminating the peso or the real. People with knowledge of the matter say its implementation is “realistic” and that it could be complemented with a swap between the two countries. Bilateral meetings will be held on January 25 to “oil” the mechanism. They are already considering “Sur” (‘South’) as a possible name for it.

At the end of last week, the Economy Minister took a mini-tour of the neighboring country to meet with top economic officials of Lula de Silva, who will take office as president on January 1, 2023. He was received in Sao Paulo by Fernando Haddad, who will be the next government’s Finance Minister, and Geraldo Alckmin, the future Vice President but also the Minister of Industry and Commerce, who will have the country’s Development Bank within his orbit.

“Two work meetings were held in order to make contact before the inauguration, which will be on January 1, and start coordinating some issues of mutual interest,” explained a source familiar with the conversations. The main focus was the creation of a common currency. The concept is different from a single currency because it does not include abolishing either country’s national currency.

Government sources said that “the meeting was very good because the Brazilians have a very similar perspective to that of Massa, as they believe that this is a good way to avoid going via the dollar.” According to the conversations, the idea is to make it a regional currency and that the rest of the South American countries can gradually join without having to eliminate their national currencies. “The feasibility is realistic, even in terms of a rapid implementation. We are trying to include it in the list for Lula’s trip to Buenos Aires, for the meeting of the Community of Latin American and Caribbean States”, they explained.

One of the other issues that was addressed is the possibility –once this initiative is active– of generating a swap between pesos and reais to offset trade deficits that may exist in the bilateral balance. This would mean that the government would not have to spend reserve dollars to pay for Brazilian imports.

The CELAC summit will be held in Argentina on January 24. The future president of Brazil is expected to participate and even communicate his decision to reintegrate Brazil into the bloc currently chaired by Alberto Fernández. The decision to temporarily remove the country from it was made by Jair Bolsonaro in January 2020, after questioning “the lack of results in the defense of democracy.”

High-level bilateral meetings are being prepared for the following day, January 25, that will aim to “oil” the mechanism of the common currency for which the name “Sur” has already been proposed.

Originally published in Ambito.com / Translated by Agustín Mango


All Right Reserved.  Buenos Aires Herald