About the Brazil-Argentina Not-a-Common Currency Idea

Brazil and Argentina’s presidents have launched discussions on a common currency, but their plans are nothing like the euro, which replaced national currencies like the lira, franc and deutsche mark entirely. What’s on the table is a common unit for commercial transactions, part of a larger strategy by recently elected Luiz Inacio Lula da Silva to boost trade and restore Brazil’s traditional influence in the region, which sagged under his predecessor, Jair Bolsonaro. Yet Lula’s plans come at a difficult time, with the region’s existing Mercosur trade block put to the test by one of its founding partners, debates over the growing influence of China in South America and political tensions spreading around the region.

Lula and Argentine President Alberto Fernandez announced their intentions to discuss a “common South American currency” in an open letter published last weekend in an Argentine newspaper. The unit would be used “for financial and commercial trade, in order to reduce operational costs and lower our external vulnerability” to the dollar, they wrote. The announcement came amid a summit of the Community of Latin American and Caribbean States. There, finance ministers of both countries clarified they are thinking of a “common means of payment” that would not replace their own domestic currencies. Other trade partners such as Uruguay and Paraguay would be welcome to join.