Brazilian President Luiz Inacio Lula da Silva said that after a meeting with his Argentinian counterpart Alberto Fernandez, the two countries have renewed talks on creating a common currency. They agreed that using the US dollar was harmful to trade. The assessment is that if the dollar stays the only currency, there will be problems like sanctions and politics that try to control the economy.
The Financial Times suggests that a currency called “sur” (south) would replace national currencies like the Brazilian real and Argentine peso. Therefore, it would encourage trade between the countries.
According to their statements, the exchange will fix problems, modernize rules, promote local currencies, and introduce a common South American currency. Therefore, this will reduce risks and costs and make the countries less vulnerable.
Old Ideas, Old Obstacles
The idea of Brazil and Argentina forming a unit of account for trade transactions is not new. This way, they can avoid paying in dollars as much as possible.
Furthermore, the leaders said they should think about common accounting units for the countries because the de-dollarization process could last at least a decade.
According to Brazilian economist Fabio Sobral, a common currency could replace the dollar in the long term. It would help a lot when concluding long-term oil sales contracts.