Economists dismiss the plan as unsustainable, led by Olivier Blanchard, head of the IMF’s economic group, who was quick to opine that “this is crazy.” political analystshowever, point out that the intention of his two countries should not be underestimated Latin America to unite their economies with the same goal that more or less obviously has always been pursued by these radical plans: to weaken the global dominance of the US currency. The reason for the plan announced at the beginning of the week by its presidents Argentine And her Brazil to create a common currency for their countries in a political situation, perhaps especially favorable for the project.

As noted in the related report Financial Times, this is not the first time such a plan has been considered, as such ideas have been explored from time to time, even if they have not materialized. In this case, the fact that left-wing presidents appeared in two countries for the first time in more than seven years may facilitate the implementation of a bold idea. And Luis Inacio Lula da Silva and Alberto Fernandez, presidents of Brazil and Argentina, respectively, seem ready to put up a united front.

Speaking to reporters earlier this week, Brazil’s president expressed hope that the two countries’ finance ministers, as well as their central bankers, have the “reason, ability and good will” to begin the work needed to create a single currency. For his part, his Argentine counterpart admitted he did not know “how the single currency with Brazil would work” but added that the two countries would be linked by “deeper ties of strategic importance that would last for decades.” However, the two leaders stressed that when their common currency is introduced, it will initially be used for commercial transactions and will circulate alongside the Brazilian real and the Argentine peso.

Former Brazilian finance minister Paulo Gendes proposed the name Real Peso, which would combine the names of the two currencies, Argentina and Brazil.

At the same time, sources close to Brazil’s previous conservative government told a British newspaper that Paulo Gendez, finance minister under the far-right Bolsonaro, had repeatedly advocated a common currency plan. He even argued that a single currency would make it easier to impose fiscal discipline while favoring the region’s economy in the future, when there would be fewer currencies globally anyway. As for Argentina, Federico Sturzenegger, who served as governor of the central bank for four years from 2015 to 2018 under the conservative government of Mauricio Macri, advocated the creation of a common central bank between the countries of the MERCOSUR group, namely Argentina, Brazil. , Uruguay and Paraguay. The idea is especially popular among the left-wing parties of Latin American countries, who believe that a common currency for trade transactions between them would strengthen their national sovereignty in the economy as a united front of countries and would hasten the dream of closer political union …

It should be noted that the former Minister of Finance of Brazil, Paulo Gendes, proposed the name “peso-real”, which would combine the names of the two currencies, Argentina and Brazil. After all, since last year, Brazil’s current finance minister, Fernando Haddad, has proposed naming the single currency “sur” or “south” and, as the FT points out, there was a clear hint of tensions dividing the country. from its northern neighbour.

Commenting on the plans of the two countries, Rodrigo Wagner, an expert on the creation of new currencies, noted that Argentina would especially benefit from the single currency, as “it needs an external anchor to be able to restore confidence in its economy.” . Trade relations between the two countries have also suffered from a chronic shortage of dollars and hard currency in general in Argentina, which has gone bankrupt many times. In 2022, they have shrunk to around $30 billion, from $40 billion a decade earlier. According to Pierpaolo Barbieri, founder of financial technology company Uala in Argentina, any outright abandonment of the plan is premature because “Brazil needs a bigger market. for its export, and a common trade unit would be the ultimate means to achieve this.”