The two largest economies in South America are Argentina and Brazil are discussing about creation of a common currency, as a coordinated effort to reduce dependency on the U.S. dollar.
The analysts are dismissing the proposal due to discrepancies between the economies of the two nations and because of rapid political shifts in the region.
Brazilian President Luiz Inacio Lula da Silva said, “Our finance ministers, each with their own economic team, can make us a proposal for foreign trade and transactions between the two countries that are to be done in a common currency.”
Lula said, “The currency would initially be designed for trade and transactions between Brazil and Argentina. It could later be adopted by fellow members of Mercosur — South America’s major trade bloc.”
The Finance Minister of Brazil, Fernando Haddad expressed that the purpose of a common currency is not to replace the Argentine peso and Brazilian real. He expressed that the name or a deadline of a common currency is not yet decided and both economies are not seeking a euro-style monetary unification.
The head of Americas at risk consultancy Verisk Maplecroft Jimena Blanco said, “Neither Argentina nor Brazil are enjoying the economic or political conditions necessary to embark on such a fundamental shift, which would take decades to be rolled out effectively.”