Brazil and Argentina plan to create a Latin American currency, the Sur, in order to “boost regional trade and reduce dependence on the US dollar”.
El Sur
The Financial Times reports that the Brazilian and Argentinian governments plan to create a new common currency. All countries in the region are invited to join
The objective is to “boost regional trade and reduce dependence on the US dollar”notes the newspaper, citing government officials.
Argentine Economy Minister Sergio Massa told the FT that the South American nations will “to study the parameters necessary for the creation of a common currency”. The reflections will go from “the fiscal question at the size of the economy and the role of central banks”.
Faced with questions, the Argentine ambassador to Brazil specifies that “it does not mean that each country does not have its currency, it means a unit of integration and increased trade through this regional bloc”.
Word “integration” does mean, however, that there is an ambition similar to that of the European Union. Mr. Massa is also preparing “a study of trade integration mechanisms”, which looks a lot like “single market” » of the EU.
We should glean more information this week. The “Sur” project is on the agenda of the meeting of the Community of Latin American States in Buenos Aires this Tuesday, January 24.
Will it be a CBDC? Will it be created in absolutely fixed quantity? If not, who will decide its money supply? The Banco Central del Sur?
BRICS and Bitcoin
The FT notes that Brazil’s central bank has so far been opposed to creating a Sur with Argentina. Indeed, Buenos Aires is showing inflation close to 100% and would be the first beneficiary of this currency, which would ultimately rest on the shoulders of Brazil.
Nevertheless, with the two countries now being led by socialist parties, the Sur project is coming out of the drawers. It could raise hopes capable of preventing a plebiscite by Javier Milei in the presidential election in October.
J. Milei proposes “the free competition of currencies which will most likely encourage Argentines to choose the dollar [américain] ». He also believes that Bitcoin is a “natural reaction to central banker scammers”.
The Sur project could also upset the discussions with the BRICS. Brazil has already made it known that it wishes report in 2025 his presidency of the BRICS initially planned for 2024. The goal being to devote himself to his presidency of the G20 without neglecting his presidency of the BRICS.
The Sur is probably a way for Brasília to strengthen the weight of Latin America within the new international reserve currency wanted by the BRICS (Brazil, Russia, India, China, South Africa)?
The Sur would indeed weigh more heavily than the Brazilian real alone within a basket of currencies belonging to the BRICS. Especially if the Sur were to be joined by all of South America.
That said, isn’t it better to strike the iron when it’s hot, even if it means inviting other countries to join the BRICS a little later?
Let’s end by pointing out that Coinbase CEO Brian Armstrong suggests that Brazil and Argentina should instead “turn to bitcoin”.
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