Brazil, Argentina discuss issuing new common currency to reduce reliance on dollar

CAIRO - 30 Janaury 2023: Brazil and Argentina discuss issuing a new common currency, according to Brazilian and Argentinian Presidents.

 

Brazil’s President Luiz Inacio and Argentina’s President Alberto Fernández wrote in an Argentinian paper –Perfil- on Sunday Jan 22, 2023 that they wanted more integration between the two neighboring countries.

 

The two presidents continued their discussion about a common South American currency that can help reduce external vulnerability and can be used for financial flows. 

 

Earlier in January, the idea of issuing a new common currency between both countries popped up at a press conference in Buenos Aires during the Brazilian president’s first trip to Argentina since he came to office. He said that establishing a common currency will help reduce reliance on the US dollar. 

 

Brazil’s Finance Minister, Fernando Haddad, stated that Argentina’s deficit of the US dollar negatively impacted the trade between the two countries and both leaders were trying to find possible solutions.

 

“Trade is really bad and the problem is precisely the foreign currency, right? So we are trying to find a solution, something in common that could make commerce grow,” Haddad said.

 

This proposal is met by skepticism from analysts who think that neither country is in position for such a complicated goal. Skepticism around economists is based on the fact that Argentina’s economy is more vulnerable than Brazil’s economy with 100 percent inflation. Furthermore, Brazil is facing difficulties funding its own fiscal deficits. According to Felipe Camargo, senior economist at Oxford Economics, he said that trade gains from this decision would be minimal.