Nearshore Americas
Source: Casa Rosada/María Eugenia Cerruti

Argentina and Brazil Discuss EU-style Monetary Union

Argentina and Brazil began discussing an EU-style monetary union in South America in an attempt to hedge against the economic impact of overdependence on the US dollar.

In a article published by the Argentine newspaper Perfil, Brazilian President Lula da Silva and Argentine President Alberto Fernandez said they were discussing “a common South American currency that could be used for financial and commercial flows.”

Before leaving for Argentina, Lula told Brazilian media that it made no sense to use dollars for trade within the region and that a common currency would reduce dependence on the dollar.

The greenback surged more than 8% in 2022, increasing importation costs as well as the cost of servicing debt denominated in dollars.

Argentina is one of the biggest victims of volatility in the foreign exchange market, with its currency plunging amid rising inflation.

Argentina’s foreign exchange reserves are shrinking, making trade more difficult for the country.

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Both countries are members of the Mercosur trade bloc, which also includes Paraguay and Uruguay. Two other countries are also likely to join the discussions in the coming months.

The plan to adopt a common currency was discussed back in 2019. The discussion ended in a deadlock after concerns were raised by the Central Bank of Brazil.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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